1. An Uber driver faces costs for driving that include sunk costs like insurance that contribute $.50 to the average cost per mile. Yet when a rider offers to pay less than $0.50 per mile for a ride, the driver agrees because
SUNK COSTS LIKE AUTO INSURANCE (IN THIS CASE) DO NOT INCREASE AS DRIVING INCREASES.
HE DOES NOT UNDERSTAND THAT SUNK COST ARE THE MOST IMPORTANT TO CONSIDER.
THE DRIVER IS IRRATIONAL; THIS DECISION WILL CAUSE A LOSS.
THE DRIVER NEEDS TO COVER ALL SUNK COSTS TO BE BETTER OFF BY ACCEPTING THE OFFER.
2.Which of the following statements reflects marginal decision-making?
STAYING IN THIS RENTAL COTTAGE LONGER WOULD BE NICE, BUT THE COTTAGE NEXT DOOR IS MORE ATTRACTIVE.
THE TOTAL COST OF THE PROGRAM IS EQUAL TO THE TOTAL BENEFITS.
BOOKING THIS CONDO IN A BETTER LOCATION IS WORTH THE EXTRA $100.
IF WE DOUBLE THE ORDER TO A DOZEN DOUGHNUTS, WE WILL PAY ONLY 20 PERCENT MORE.
3. It is said that the rational consumer will act according to his or her self-interest, and that self-interest can include a concern for one’s family and friends, but not often society as a whole. Which of the following illustrates this type of decision?
THE RENTAL OF RECREATIONAL VEHICLES FOR USE IN NATIONAL PARKS IS RESPONSIVE TO CONCERNS OF NOISE POLLUTION.
OUR TIME WAS VERY VALUABLE AT THAT MOMENT, BUT WE STOPPED TO PUT OUT THE FIRE BEFORE IT SPREAD.
MR. T. DECIDES NOT TO PURCHASE ANY CASE OF WATER BOTTLE SO THERE COULD BE MORE LEFT FOR OTHER CONSUMERS.
THE BOAT RENTAL WAS WORTH THE ADDITIONAL FISH CAUGHT, REGARDLESS OF HOW LITTLE FISH WE LEFT BEHIND.
4. Dawnell is a skilled dancer. She is currently teaching modern dance full time for three high schools and makes $44,000 a year. She is now giving up her work and joining a touring dance company for the next two years. She will make $24,000 a year dancing, but gain much more in experience and connections. Dawnell’s decision will result in
A TWO YEAR OPPORTUNITY COST OF $40,000 AFTER LEAVING HER TEACHING POSITION.
A TWO YEAR OPPORTUNITY COST OF $88,000 AFTER LEAVING HER TEACHING POSITION.
A ONE YEAR OPPORTUNITY COST OF $44,000 AFTER LEAVING HER TEACHING POSITION.
A ONE YEAR OPPORTUNITY COST OF $24,000 AFTER LEAVING HER TEACHING POSITION.
5. Marcus is considering which college major to choose. In taking a rational approach, Marcus should consider
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