MCQ Rational decision

1. A rational decision benefits the decision maker as

much as possible. To make a rational yes-or-no

decision you should pick the option that has

• the highest benefit

• b. the lowest cost.

• benefits that outweigh the costs.

• costs that outweigh the benefits.

Thinking like an economist would lead you to

believe that for a gifted college football player, the

most significant cost of remaining in college for

another year rather than entering the NFL draft is

• tuition.

• books.

• housing.

• lost wages.

A student operating on her budget line for shoes

and shirts

• would not be able to buy more shirts.

• would not be able to buy more shoes.

• would not be able to buy more shoes without

  buying more shirts.

• would not be able to buy more shoes without

  buying fewer shirts.

Which of the following would be considered a sunk

cost?

• money you will spend to repair your car

• money you already spent to buy your car

• insurance premiums on your car for the coming

  six months

• the cost of gasoline to operate your car

The net benefit of a choice is

• the benefit of the choice plus the cost of the

  choice.

• the benefit of the choice minus the cost of the

  choice.

• the benefit of the choice times the cost of the

  choice.

• the benefit of the choice divided by the cost of

  the choice.

The decision- making rule for making a rational

choice is best described by which of the following?

• Always buy the item with the lowest cost.

• Always buy the item with the highest benefit.

• Always buy the item with the lowest net benefit.

• Always buy the item with the highest net

  benefit.

The table below lists the benefit and cost of four

different vacation destinations. Based on the

information in the table, a rational consumer

would pick

• Six Flags because it is the least expensive.

• The Grand Canyon because it has the highest

  net benefit.

• Disney World because it has the highest benefit.

• New Orleans because it has the lowest net

  benefit

Which of the following accurately describes the

concept of marginal benefit?

• the total benefit derived from consuming all

  units of a good

• the total benefit derived from consuming all units of a good minus the total cost of consuming all units of the good

• the additional benefit of consuming the next

  unit of a good

• the net benefit of consuming the next unit of a

  good

All of the following are mistakes to avoid in making

rational decisions except

• letting sunk costs matter.

• focusing exclusively on fairness.

• making purchases using net benefit analysis.

• sticking to the status quo.

The branch of economics called behavioral

economics combines economics and

• psychology.

• history.

• sociology.

• accounting.