Question : 11) Sunk costs A) costs associated with repairing something you already : 1245195

Economics

11) Sunk costs

A) are costs associated with repairing something you already own.

B) are important for optimal decision making.

C) are costs that have already been paid and cannot be recaptured in any significant way.

D) are costs that firms sink into marketing.

12) Which of the following is a common mistake consumers commit when they make decisions?

A) They take into account nonmonetary opportunity costs but ignore monetary costs.

B) They are overly pessimistic about their future behavior.

C) They fail to ignore sunk costs.

D) They sometimes value fairness too much.

13) Which of the following is not a common mistake made by consumers?

A) the failure to take into account the implicit costs of an activity

B) the failure to ignore sunk costs

C) being overly optimistic about their future behavior

D) being overly pessimistic about their future behavior

14) Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair. When asked by her boss, Mme. Ramotswe why does she not simply give away the new pair, she said: “But I paid so much for them.”Grace’s behavior

A) is rational: she should not discard a valuable item.

B) ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not.

C) supports the endowment effect which states that ownership of an item makes it more valuable.

D) is rational because the more you pay for an item the more valuable it is.

15) Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions. Which of the following could explain this observation?

A) People measure the value of a good in terms of its purchase price.

B) Even though sunk costs cannot be recovered, it has been incurred and therefore should be treated as part of the product’s value.

C) If consumers maximize their utility, it makes sense to consider the full purchase price of a product in their consumption decisions.

D) Sunk costs have a higher opportunity cost than costs that can be recovered.

16) Arnold Kim began blogging about Apple products during his fourth year of medical school. Kim’s website, MacRumors.com, became so successful that he decided to give up his medical career and work full time on his website, despite the nearly $200,000 he had invested in his education. In making his decision, Kim decided to ignore the money and time he spent on his education. Economists would say that Kim made a

A) rational decision to ignore these sunk costs.

B) poor decision since he had already invested his time and money on his medical career.

C) poor decision since doctors are in greater demand than bloggers.

D) hasty decision by not waiting to recoup his financial investment before giving up his medical career.

17) A study discussed in the Making the Connection feature in the text found that there is ________ that some consumers are not well aware of prices, even for goods they buy regularly.

A) no evidence

B) substantial evidence

C) little evidence

D) no reason to believe

18) Behavioral economics helps explain why customers ________ at J.C. Penney.

A) favored the policy of everyday low prices and not sales and coupons

B) favored sales and coupons and not the policy of everyday low prices

C) were equally happy with sales and coupons and the policy of everyday low prices

D) responded negatively to both sales and coupons and the policy of everyday low prices

19) A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational. This area is called

A) behavioral economics.

B) irrational economics.

C) social economics.

D) new wave economics.

20) Behavioral economics refers to the study of situations

A) where consumers and firms appear to make choices that are appropriate to reach their goals.

B) where consumers and firms appear to value fairness when they make choices.

C) where consumers and firms disobey the laws of demand and supply.

D) where consumers and firms do not appear to be making choices that are economically rational.

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July 1, 2023

61.When there is a shortage in a market, prices are likely to:

A. Fall because buyers do not wish to buy as much as sellers want to sell.

B. Rise because some buyers will offer to pay a higher price.

C. Fall because sellers are likely to reduce their production if prices rise.

D. Rise because the government will put a price ceiling in place.

62.If a market shortage exists:

A. The invisible hand will work to reduce the price.

B. The only solution is for the government to raise the price.

C. Producers will compete for customers by reducing prices.

D. Consumers will compete for the product by offering to pay more.

63.A market surplus occurs when:

A. People cannot buy the amount of goods and services that they are willing and able to buy.

B. The price is less than the equilibrium price.

C. The quantity supplied exceeds the quantity demanded at a given price.

D. There is a price ceiling.

64.When there is a surplus in a market, prices are likely to fall because:

A. Buyers do not wish to buy as much as sellers want to sell.

B. Some buyers will offer to pay a higher price, initiating a move up the supply curve.

C. Sellers are likely to increase their production.

D. Buyers will wait for the government to establish a price floor.

65.If a market surplus exists:

A. The only resolution is for the government to set the price.

B. Consumers will compete for the product buy offering to pay more.

C. Producers will compete for customers by reducing prices.

D. The equilibrium price is equal to the price ceiling.

66.If demand is constant, a decrease in the supply of gasoline will cause the equilibrium price:

A. To rise and quantity to fall.

B. And quantity both to rise.

C. To fall and quantity to rise.

D. And quantity both to fall.

67.If demand is constant, a leftward shift in the supply curve will result in:

A. A decrease in equilibrium quantity and a lower equilibrium price.

B. An increase in equilibrium quantity and a lower equilibrium price.

C. A decrease in equilibrium quantity and a higher equilibrium price.

D. An increase in equilibrium quantity and a higher equilibrium price.

68.The price of chocolate candy bars rises. This could be due to:

A. A decrease in the wage rate paid to workers in the candy bar factories.

B. A decrease in the cost of chocolate, which is used to produce candy bars.

C. A subsidy by the federal government for the producers of chocolate candy bars.

D. A decrease in the number of chocolate candy bar producers.

69.If demand is unchanged, a rightward shift in the supply curve for plasma TVs will cause:

A. A decrease in equilibrium quantity and a higher equilibrium price.

B. An increase in equilibrium quantity and a higher equilibrium price.

C. An increase in equilibrium quantity and a lower equilibrium price.

D. A decrease in equilibrium quantity and a lower equilibrium price.

70.Which of the following would cause a decrease in the price of automobiles?

A. A technological advance in automobile manufacturing.

B. An increase in the wages paid to automobile assembly line workers.

C. A decrease in the cost of gasoline.

D. An increase in the number of buyers.