Sadie just bought a new karaoke machine to replace her old one. Her old one works perfectly fine and would sell on Craigslist for $50. The fact that Sadie would not pay $50 for it, yet continues to let it sit in her closet unused is explained by:
A. ignored sunk costs.
B. the implicit cost of ownership.
C. irrationally considering sunk costs.
D. the cost of admitting she likes karaoke.
Answer: B
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Explain the following statement: “Good decisions typically require marginal analysis, which weighs added costs against added benefits.”
What will be an ideal response?
Social Security pension benefits are
A. subject to income taxes for those with certain income levels. B. non-taxable for all retirees. C. subject to state, but not federal, income taxes. D. subject to capital gains taxes.
Relative to private firms, we should expect public bureaus to be
a. smaller b. more cost-efficient c. less responsive to consumer demand d. more concerned with adopting new technologies e. more in tune with consumer desires
Suppose that you are a bank manager, and the Federal Reserve raises the required reserve ratio from 10% to 12%. What actions would you need to take?
A. You would have to reduce lines to make up for the necessary increase in reserves B. You would need to make loans to match the new reserve requirement C. You would have to charge less for your loans because rates are now at 12%