Q: Which of the following equations correctly represents economic surplus?

$$\text{Economic Surplus} = \text{Total Benefits} - \text{Total Costs}$$

Question 1

According to the Cost-Benefit Principle, which of the following best describes when you should purchase a pair of Air Jordans?

Accepted Answer

When your willingness to pay is at least as large as the total cost.

Question 2

If the price of Air Jordans is $$180 and your willingness to pay is 200$$, what is your economic surplus from buying the shoes?

Accepted Answer

$20

Question 3

Which of the following is NOT considered an opportunity cost when deciding to buy Air Jordans?

Accepted Answer

The cleaning brush you bought last year and cannot return.

Question 4

John is considering going to graduate school for an MBA. He will have to quit his $$90,000 job and pay 80$$,000 in tuition per year. Rent is $26,000 per year, and he spends 10 hours per day either working or studying. What is the annual opportunity cost of getting the MBA?

Accepted Answer

$170,000

Question 5

Which principle is best applied when deciding whether to watch one more episode of a TV series?

Accepted Answer

Marginal Principle

Question 6

Suppose the marginal benefit of hiring a sixth employee at your hair salon is $$40, and the marginal cost is 150. $$According to the rational rule, should you hire the sixth employee?

Accepted Answer

No, because the marginal cost exceeds the marginal benefit.

Question 7

Which of the following equations correctly represents economic surplus?

Accepted Answer

$$	ext{Economic Surplus} = 	ext{Total Benefits} - 	ext{Total Costs}$$

Question 8

If you already paid for a streaming subscription and cannot get a refund, what type of cost is this when deciding whether to binge-watch a new series?

Accepted Answer

Sunk cost

Question 9

Which principle requires you to consider how your decision to buy Air Jordans affects your ability to buy other goods?

Accepted Answer

Interdependence Principle

Question 10

A hair salon owner wants to maximize profit. The price of a haircut is $$20, and the wage per employee is 150 $$per day. If hiring the fifth employee increases total haircuts from 40 to 48, what is the marginal benefit of hiring the fifth employee?

Accepted Answer

$160

Question 11

Which of the following best describes the rational rule for 'how many' decisions?

Accepted Answer

Continue the activity until marginal benefit is less than marginal cost.

Question 12

If the marginal benefit of watching another episode is $$7 and the marginal cost is 9$$, what should you do according to the marginal principle?

Accepted Answer

Stop watching.

Question 13

Which of the following is an example of interdependence in decision making?

Accepted Answer

Considering how buying Air Jordans affects your future purchases.

Question 14

If John’s future earnings will be $10,000/year higher after getting an MBA and he plans to work for 35 years, what is the total benefit from the MBA?

Accepted Answer

$350,000

Question 15

Which principle helps you decide between two alternatives by considering what you give up when choosing one over the other?

Accepted Answer

Opportunity Cost Principle

Question 16

If the marginal benefit of hiring the seventh employee at the salon is $$0 and the marginal cost is 150$$, what happens to profit if you hire this employee?

Accepted Answer

Profit decreases by $150.

Question 17

Which of the following is a correct application of the opportunity cost principle?

Accepted Answer

Comparing the value of the chosen action to the value of the next best alternative.

Question 18

If you buy Air Jordans for $$180 and the cost to make them is 100$$, what is the seller’s economic surplus?

Accepted Answer

$80

Question 19

Which of the following is NOT a key principle of good decision making in microeconomics?

Accepted Answer

Sunk Cost Principle

Question 20

If the total benefit from hiring 5 employees at a salon is $$960 and the total cost is 750$$, what is the profit?

Accepted Answer

$210

Principles of Decision Making in Microeconomics

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