Jason spends all afternoon baking a cake. When it comes out of the oven, it's burnt and sunken in the middle, and Jason considers whether he should throw it away or not. If Jason were rational, he would compare the ________, which is ________, to the benefits of eating a burnt, sunken cake.
A. benefit of throwing the cake away; the value of not having to eat burnt cake
B. sunk cost; the time and ingredients spent making the cake
C. opportunity cost; the value of the time spent and utility from eating or doing something else
D. total cost; the value of the time spent making the cake, the cost of ingredients, and value of the time that could be spent doing something other than eating the cake
Answer: C
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The formula for price elasticity of demand that is used in practice
A. usually drops all minus signs. B. usually takes on different values at different points on the demand curve. C. may calculate the percentage change in price between P1 and P2 as “(P2 ? P1) as a percentage of (P1 + P2)/2.” D. All of the responses are correct.
Which of the following tax changes would a supply-side economist be most likely to favor?
a. eliminating an investment tax credit b. an increase in the capital gain tax c. lower marginal income tax rates d. an increase in the personal income tax rate for high-income individuals
When a one-percent change in price is accompanied by a larger percent change in quantity demanded,
a. demand is inelastic b. supply is elastic c. the good is a normal good d. the good is an inferior good e. demand is elastic
If the capital stock remains fixed while the supply of labor increases, it is likely that
A. the productivity of labor will rise. B. the productivity of labor will fall. C. output per capita will rise. D. the productivity of labor will not change.