True or False: The best things in life are free. [opportunity costs]
True or False: Anything worth doing is worth doing well [cost-benefit analysis]
Raleigh politicians have proposed a new convention center. They suggest paying for it by raising the hotel tax. They argue that the project will be free to voters because out-of-town visitors will pay for it. Which of the following best explains why the convention center is not free to Raleigh citizens?
A) The tax increase will cause a reduction in visits to Raleigh.
B) Cost overruns are common with public projects.
C) The marginal benefit of the project exceeds the marginal cost.
D) The tax funds could be used for other projects.
source: Salemi, Journal of Economic Education, 2009
You are considering what to do after graduation. You have an offer from a non-profit firm in San Diego that pays $25,000 a year. You also have an offer from a consulting firm that pays $35,000 a year. If you take the first job, we can infer that:
A) You are irrational
B) the value to you of working for a non-profit is at least $10,000
C) the value to you of working for a consulting firm is at least $10,000
D) you can't do math
Stan has bought a vintage car for $4,000, planning to restore and sell the car. He spends $10,000 restoring the car. The Blue Book value for the car at this point is $10,500. As an alternative, Stan can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $15,000. Should Stan do the additional repairs?
A) No, he should sell now for $10,500
B) Yes, he should complete the repairs and sell for $15,000
C) It doesn't matter either way