1. The marginal cost of consuming each ·cnp of coffee is $1.50, while the margin
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Question
1. The marginal cost of consuming each ·cnp of coffee is $1.50, while the marginal benefit derived is $4 for the first cup, and decreases by $1 for each cup consumed thereafter. A rational decision maker will consume:
a. 1 cup of coffee
b. 2 cups of coffee
c. 3 cups of coffee
d. 4 cups of coffee
2. You go to the Farmer's Market on Saturdays because you want tomatoes that are fresher than those you get at Meijer. Farmers sell their vegetables at the Market because they have surplus they would like to get rid of to make some extra money. You act in your own self interest, the farmers act in their self interest, yet you're both made better off by going to the Farmer's Market. In economic terms, what best describes this situation?
A. coordination by the invisible foot.
B. coordination through city government rationing.
c. coordination by the invisible handshake.
d. coordination by the invisible hand.
3. After a city imposes a rent control law:
a. landlords reduce the quantity of apartments offered for rent.
b. people who work in the city have less costs of getting to work.
c. all who want to rent an aparttnent in the city can do so.
d. All of these occur.
4. Joey knows he is spending too much time playing an online video game and his grades are suffering. "But I can't quit," Joey tells you. "I paid $80 for a six-month subscription. Plus, I've already invested 100 hours into the game. I should be going." What would your best economic advice be for Joey?
a. Since he has already spent such a lot of money and time, he should continue playing.
b. IF the past costs exceed the future benefits, he should stop playing.
c. If the past costs exceed the future benefits, he should continue playing '•
d. It doesn't matter how much money or time he has already spent. These are sunk costs. He should stop playing if the future benefit of playing does not exceed the future cost of playing.
5. Which of the following is an example of rational people responding to incentives?
A. Amy was late for work because Sheldon demanded a ride to the comic book store
B. Bernadette bought two cardigans because there was a "Buy One Get One Free" sale
C. Penny scraped her knee because she tipped in her high heel shoes ·
D. Lucy didn't talk to anyone at a party because of her social anxiety disorder
Explanation / Answer
a) "C"
3 cups of coffee because the utility form the fourth cup of coffee is less than the price of the coffee.
b) "D"
It is called coordination by the invisible hand where every seller and buyer think of their own benefit.
c) "A"
At a lower price, the supply of the goods will decrease. Same goes for the apartments.
d) "D"
It was sunk cost and can't be recovered so better concentrate on the future benefits.
e) "B"
Getting one more in buy one geet one sale.
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