ECON 111 Microeconomics Final
questions with complete solutions
Explicit Costs - correct answer ✔✔input costs that require an outlay of money by the firm
Implicit Costs - correct answer ✔✔input costs that do not require an outlay of money by the
firm
Accounting profit - correct answer ✔✔total revenue minus total explicit cost
Economic Profit - correct answer ✔✔total revenue minus total cost, including both explicit and
implicit costs
Marginal Cost - correct answer ✔✔the cost of producing one more unit of a good
Marginal Benefit - correct answer ✔✔the additional benefit to a consumer from consuming one
more unit of a good or service
Optimal Quantity - correct answer ✔✔the quantity that generates the highest possible total
profit
Sunk Cost - correct answer ✔✔a cost that has already been committed and cannot be
recovered
Risk Aversion - correct answer ✔✔The tendency to prefer a sure gain of a moderate amount
over a riskier outcome, even if the riskier outcome might have a higher expected payoff.
, Mental Accounting - correct answer ✔✔categorizing spending and saving decisions into
"accounts" mentally designated for specific consumption transactions, goals, or situations
Loss Aversion - correct answer ✔✔The strong tendency to regard losses as considerably more
important than gains of comparable magnitude—and, with this, a tendency to take steps
(including risky steps) to avoid possible loss.
Status Quo Bias - correct answer ✔✔tendency to do nothing when faced with making a decision
Utility - correct answer ✔✔Ability or capacity of a good or service to be useful and give
satisfaction to someone.
Consumption Bundle - correct answer ✔✔the collection of all the goods and services consumed
by that individual
Utility Function - correct answer ✔✔formula that assigns a level of utility to individual market
baskets
Marginal Utility - correct answer ✔✔an additional amount of satisfaction
Budget Constraint - correct answer ✔✔the limited amount of income available to consumers to
spend on goods and services
Budget Line - correct answer ✔✔A line that shows the different combinations of two products a
consumer can purchase with a specific money income, given the products' prices.
Optimal Consumption Bundle - correct answer ✔✔the consumption bundle that maximizes the
consumer's total utility given his or her budget constraint
questions with complete solutions
Explicit Costs - correct answer ✔✔input costs that require an outlay of money by the firm
Implicit Costs - correct answer ✔✔input costs that do not require an outlay of money by the
firm
Accounting profit - correct answer ✔✔total revenue minus total explicit cost
Economic Profit - correct answer ✔✔total revenue minus total cost, including both explicit and
implicit costs
Marginal Cost - correct answer ✔✔the cost of producing one more unit of a good
Marginal Benefit - correct answer ✔✔the additional benefit to a consumer from consuming one
more unit of a good or service
Optimal Quantity - correct answer ✔✔the quantity that generates the highest possible total
profit
Sunk Cost - correct answer ✔✔a cost that has already been committed and cannot be
recovered
Risk Aversion - correct answer ✔✔The tendency to prefer a sure gain of a moderate amount
over a riskier outcome, even if the riskier outcome might have a higher expected payoff.
, Mental Accounting - correct answer ✔✔categorizing spending and saving decisions into
"accounts" mentally designated for specific consumption transactions, goals, or situations
Loss Aversion - correct answer ✔✔The strong tendency to regard losses as considerably more
important than gains of comparable magnitude—and, with this, a tendency to take steps
(including risky steps) to avoid possible loss.
Status Quo Bias - correct answer ✔✔tendency to do nothing when faced with making a decision
Utility - correct answer ✔✔Ability or capacity of a good or service to be useful and give
satisfaction to someone.
Consumption Bundle - correct answer ✔✔the collection of all the goods and services consumed
by that individual
Utility Function - correct answer ✔✔formula that assigns a level of utility to individual market
baskets
Marginal Utility - correct answer ✔✔an additional amount of satisfaction
Budget Constraint - correct answer ✔✔the limited amount of income available to consumers to
spend on goods and services
Budget Line - correct answer ✔✔A line that shows the different combinations of two products a
consumer can purchase with a specific money income, given the products' prices.
Optimal Consumption Bundle - correct answer ✔✔the consumption bundle that maximizes the
consumer's total utility given his or her budget constraint
