Practice Questions
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In marginal analysis, what is the primary goal when comparing additional costs to additional benefits?
The main goal is to find the best level of production. Other options are incorrect because Some might think the goal is to make as much money as possi...
In the context of marginal analysis, how does an increase in consumption of a good affect the marginal utility derived from it?
When you consume more of a good, the extra satisfaction you get from each additional unit usually goes down. Other options are incorrect because Some ...
In the context of marginal analysis, if a consumer experiences a decrease in marginal utility from consuming additional units of a good, how should they adjust their resource allocation to maximize overall satisfaction?
When the extra satisfaction from consuming more of a good goes down, it means you should eat less of it. Other options are incorrect because Some migh...
In the context of marginal analysis, how should a firm decide whether to increase production of a good when the marginal benefit exceeds the marginal cost?
When the extra benefit from making one more item is greater than the extra cost, the firm can earn more money. Other options are incorrect because Som...
How does the principle of diminishing returns affect resource allocation in a competitive market, particularly in the context of supply and demand interaction?
Diminishing returns mean that adding more resources leads to smaller increases in output. Other options are incorrect because Some might think that di...
What is the definition of marginal cost in economics?
Marginal cost is the extra cost of making one more item. Other options are incorrect because This option talks about total costs, not just the extra c...
What does marginal benefit refer to in economics?
Marginal benefit is the extra happiness or satisfaction you get from using or consuming one more item. Other options are incorrect because This option...
In marginal analysis, what does opportunity cost refer to?
Opportunity cost is what you give up when you choose one option over another. Other options are incorrect because This option talks about total costs,...
Which of the following statements are true regarding marginal analysis in economics? Select all that apply.
Other options are incorrect because This statement is incorrect; This is a common misunderstanding....
When considering whether to produce one more unit of a good, how should a firm evaluate its decision using marginal analysis?
A firm should look at the extra cost of making one more item and the extra money it can earn from selling it. Other options are incorrect because Focu...
Arrange the following steps in the process of conducting marginal analysis in order: A) Identify the marginal costs of producing an additional unit, B) Compare the marginal benefits to the marginal costs, C) Make a decision based on the comparison, D) Determine the marginal benefits of producing an additional unit.
First, you find out how much it costs to make one more item. Other options are incorrect because This option starts with benefits instead of costs; Th...
If a company finds that the marginal benefit of producing an additional unit of product is greater than the marginal cost, what is the most likely outcome of this analysis?
When the extra benefit from making one more item is higher than the cost, it makes sense to produce more. Other options are incorrect because Some mig...
A firm decides to produce one more unit of product A. If the marginal cost of production is $50 and the marginal benefit is $70, what should the firm do?
The firm should produce the extra unit. Other options are incorrect because Some might think not to produce if costs are high; This option confuses ma...
Marginal Benefit : Marginal Cost :: Total Revenue : ?
Total Revenue is the money a business makes. Other options are incorrect because Opportunity Cost is what you give up when you choose one option over ...
Alex owns a bakery and is considering whether to produce an additional batch of cookies. The marginal cost of producing this batch is $20, while the marginal benefit from selling it is $30. What should Alex do based on marginal analysis?
Alex should make the extra batch. Other options are incorrect because This answer thinks the cost is too high; This option suggests only producing if ...
A company is considering whether to produce one additional unit of a product. The marginal cost of producing this unit is $50, while the marginal benefit is estimated to be $70. Which category does this decision fall into and why?
The extra benefit of $70 is greater than the cost of $50. Other options are incorrect because Some might think that a lower cost than benefit still le...
In marginal analysis, the comparison of the additional costs incurred from producing one more unit is referred to as __________.
Marginal cost is the extra cost of making one more item. Other options are incorrect because Average cost looks at the total cost divided by the numbe...
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