Problem #7:
7a. As consumers change their taste by now preferring smaller
and more fuel-efficient cars, the:
A) demand for SUV's will decrease.
B) quantity demanded for SUV's will rise.
C) demand for SUV's will increase.
D) quantity demanded for SUV's will fall.
7b.If the market supply of olive oil increases, this will
create:
A) a higher price and a higher quantity of olive oil traded in
the market.
B) a higher price and a lower quantity of olive oil traded in
the market.
C) a lower price and a higher quantity of olive oil traded in
the market.
D) a lower price and a lower quantity of olive oil traded in
the market.
7c.You are planning a vacation trip to Hawaii. The travel
website offers three options: You can buy one of three vacation
package options: (a) $3000 for 6 days, or (b) $3300 for 7 days, or
(c) $3400 for 8 days.
You don’t have enough time for the eighth day.
A) Your marginal cost of option (a) vs option (b) is $300
whereas your marginal benefit is an extra day to enjoy Hawaii
B) Your marginal cost of option (a) vs option (b) is $3000
whereas your marginal benefit is an extra day to enjoy Hawaii
C) Your marginal cost of option (a) vs option (b) is $300
whereas your marginal benefit is $100.
D) A and B
7d. Lisa is a mother of two small children. She needs to
decide whether to work overtime to earn extra money and spend less
time with her two small children.
A) Lisa’s marginal cost is her absence from her small children
and her marginal benefit is the extra money she would earn by
working overtime.
B) Lisa’s marginal cost is her absence from her small children
and her marginal benefit is working only eight hours (not
overtime).
C) A and B.
D) Neither A nor B.
7e. You are going shopping for groceries and you have to
decide whether to buy a gallon of organic milk or a gallon of
conventional milk. The prices of a gallon of organic milk and a
gallon of conventional milk are $4 and $3.20 respectively.
A) your marginal cost of buying one gallon of organic milk vs
one gallon of conventional is milk is 80c; whereas your marginal
benefit is healthier milk and less negative impact on the
environment.
B) your marginal cost of buying one gallon of organic milk vs
one gallon of conventional is milk is $4; whereas your marginal
benefit is healthier milk and less negative impact on the
environment.
C) your marginal cost of buying one gallon of organic milk vs
one gallon of conventional is milk is $3.20; whereas your marginal
benefit is healthier milk and less negative impact on the
environment.
D) B and C
7f. Why are the marginal benefit and marginal cost important
to government programs?
A) To see which programs comparatively over- or under-spend
based on results
B) To save tax dollars for the citizens
C) Because it helps reduce total waste
D) Because high-cost programs should always be replaced