1) In 1985, Alice paid $20,000 for an option to purchase ten acres of land. By paying the $20,000, she bought the right to buy the land for $100,000 in 1992. When she acquired the option in 1985, the land was worth $120,000. In 1992, it is worth $110,000. Should Alice exercise the option and pay $100,000 for the land? A) Yes. B) No. C) It depends on what the rate of inflation was between 1985 and 1992. D) It depends on what the rate of interest was. 2) Which of the following statements is true regarding the differences between economic and accounting costs? A) Accounting costs include all implicit and explicit costs. B) Economic costs include implied costs only. C) Accountants consider only implicit costs when calculating costs. D) Accounting costs include only explicit costs. 3) In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of A) a fixed cost. B) a variable cost. C) an implicit cost. D) an opportunity cost. E) a sunk cost. 4) Which of the following statements correctly uses the concept of opportunity cost in decision making? I. "Because my secretary's time has already been paid for, my cost of taking on an additional project is lower than it otherwise would be." II. "Since NASA is running under budget this year, the cost of another space shuttle launch is lower than it otherwise would be." A) I is true, and II is false. B) I is false, and II is true. C) I and II are both true. D) I and II are both false. The average total cost to produce 100 cookies is $0.25 per cookie. The marginal cost is constant at $0.10 for all cookies produced. 5) Refer to Scenario 7.1. The total cost to produce 100 cookies is A) $0.10 B) $0.25 C) $25.00 D) $100.00 E) indeterminate 6) Refer to Scenario 7.1. The total cost to produce 50 cookies is A) $20 B) $25 C) $50 D) $60 E) indeterminate