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Marginal Analysis quiz #2 Flashcards

Marginal Analysis quiz #2
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  • Why do many economic decisions involve thinking at the margin?
    Because optimal choices depend on comparing the additional costs and benefits of small changes.
  • Calculations of cost and benefit are always which of the following?
    Relative to the next unit or marginal change.
  • What information does marginal analysis help a firm to determine?
    The optimal level of production or consumption.
  • Which of the following statements reflects marginal decision-making?
    Choosing to do something if the additional benefit exceeds the additional cost.
  • Which of the following options is not included in the marginal cost of a production decision?
    Sunk costs.
  • Which of the following is a basic step in conducting marginal cost analysis?
    Calculate the change in total cost from producing one more unit.
  • What refers to the level of detail in the model or the decision-making process?
    The margin or marginal analysis.
  • When does marginal product equal total product?
    When only one unit of input is used.
  • Which of the following must be true if average variable costs are decreasing?
    Marginal cost is less than average variable cost.
  • What is the opportunity cost of increasing the number of computers from 14 to 15?
    The value of the next-best alternative forgone to produce the 15th computer.
  • How does a business use marginal analysis to decide how many workers to employ?
    By comparing the additional cost of hiring a worker to the additional benefit from their output.
  • How does the marginal product of labor change as more workers are hired?
    It typically decreases due to diminishing returns.
  • What most likely will happen if the pie maker bakes a seventh pie?
    The marginal cost may exceed the marginal benefit, indicating overproduction.
  • Which best describes the graphical portrayal of marginal cost?
    It is typically an upward-sloping curve showing increasing costs with additional output.
  • What is the amount of marginal utility of the 5th movie ticket?
    It is the additional satisfaction gained from consuming the 5th ticket.
  • Marginal shows how much money can be made if a producer sells one additional unit of a good.
    Marginal revenue.
  • For a monopolist, marginal revenue can sometimes be negative.
    True.
  • MP first rises because the fixed capital gets used efficiently. What happens next?
    It eventually falls due to diminishing returns.
  • Which principle supports the need to do more than normal for benefits to occur?
    Marginal analysis.
  • When the marginal product increases, the marginal cost of production declines.
    True.
  • Refer to the table below. What is the marginal cost of producing the 200th pizza?
    It is the increase in total cost from producing the 200th pizza.
  • If marginal cost exceeds average total cost in the short run, then which is likely to be true?
    Average total cost is rising.
  • Which best describes marginal utility?
    The additional satisfaction gained from consuming one more unit of a good.
  • Curve 2 represents marginal ______.
    Cost or benefit, depending on the context of the graph.
  • One method for studying opportunity cost is to think in terms of
    Marginal analysis.
  • Marginal propensity to consume refers to
    The fraction of additional income spent on consumption.
  • Producers must understand the marginal benefit of making an additional unit, which shows the
    Extra satisfaction or revenue from producing one more unit.
  • The marginal benefit of a slice of pizza is the
    Additional satisfaction gained from eating that slice.
  • The point at which it is no longer advantageous to buy in bulk is known as marginal
    Cost exceeding marginal benefit.
  • The marginal benefit of a slice of pizza is the:
    Extra satisfaction from eating that slice.
  • Marginal thinking is best demonstrated by:
    Deciding whether to consume one more unit based on its extra benefit and cost.
  • According to the chart, the marginal revenue
    Is the increase in total revenue from selling one more unit.
  • To increase marginal return, a company might consider
    Improving efficiency or technology to boost output per input.
  • Marginal thinking is best demonstrated by
    Comparing the extra benefit and cost of a small change in activity.
  • Self-interest, marginal decision making, and optimization form the basis for:
    Rational economic behavior.
  • The main goal of using a cost-benefit analysis is to reach a
    Decision where marginal benefit equals marginal cost.
  • A marginal change is a
    Small, incremental adjustment to an existing plan of action.
  • Decision made based on maximum benefit and value is called
    Marginal analysis.
  • Producer A’s opportunity cost would be
    The value of the next-best alternative forgone by producing one more unit.
  • The point of maximum profit is the point at which the marginal cost equals the
    Marginal revenue.