1. If H represents the number of hours spent on an activity, then which of the following could represent a marginal cost function?

Multiple Choice

• 100H + 20H²
• -100H + 20H²
• 100H - 20H²
• -100H - 20H²

2. The marginal cost of action choice X:

Multiple Choice

• measures the additional cost of a small change in X.
• is minimized at the best level of activity X.
• measures the cost that a decision maker has already incurred by pursuing activity X.
• tends to decrease as X increases

4. If MB grows smaller and MC grows larger as the activity level grows, then:

Multiple Choice

• net benefit can be increased by increasing the action.
• an interior action for which MB = MC is the best choice.
• net benefit can be increased by decreasing the action.
• there is no best choice

5. The cost associated with foregoing the opportunity to employ a resource in its best alternative use is called:

Multiple Choice

• an opportunity cost.
• a sunk cost.
• total cost.
• a fixed cost

6. Suppose that you can hire a worker in one-hour increments. For hours of work up to 4, the total benefit of the worker (in dollars) is B(0) = 0, B(1) = 25, B(2) = 45, B(3) = 60, and B(4) = 70. What is the marginal benefit of the second hour of the worker's time?

Multiple Choice

• $25
• $20
• $10
• There is not enough information to answer the question.

7.Consider a consumer choosing between spending her money on food, F, or clothing, C. Assume that a unit of food and a unit of clothing have the same price, and that the consumer can afford a total of 20 units of either food or clothing. The benefit of food is given by B(F) = 100F, with MB(F) = 50/F. The benefit of clothing is given by B(C) = 25C, with MB(C) = 25. How many units of food should the consumer buy?

Multiple Choice

• 6
• 0
• 2
• 4

8.The cost associated with foregoing the opportunity to employ a resource in its best alternative use is called:

Multiple Choice

• a sunk cost.
• a fixed cost.
• total cost.
• an opportunity cost.