Practice Questions
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What is the impact of increasing production on the marginal cost and producer surplus?
When production increases, the marginal cost often decreases. Other options are incorrect because This answer suggests that costs go up when making mo...
In the context of marginal cost and benefit analysis, how does the principle of diminishing returns affect market equilibrium when additional units of a good are produced?
As more of a good is made, each extra unit costs more to produce. Other options are incorrect because Some might think that making more goods lowers c...
A consumer has $100 to spend on two goods, A and B. The marginal benefit of the last unit of good A is $20, while the marginal benefit of the last unit of good B is $30. To maximize utility, how should the consumer allocate their spending?
To get the most satisfaction, spend more on the good that gives more benefit. Other options are incorrect because Spending all on good A ignores the h...
In the context of marginal cost and benefit analysis, how does the production possibilities frontier (PPF) help in making decisions about resource allocation in a market at equilibrium?
The PPF shows all the ways we can use our resources to make two different goods. Other options are incorrect because This answer confuses demand with ...
In a market at equilibrium, how does the analysis of marginal costs and benefits influence consumer surplus when a new tax is introduced?
When a tax is added, prices go up. Other options are incorrect because This suggests that less demand leads to more surplus, which is not true; This o...
What is the marginal cost of producing one additional unit of a good if the total cost of producing 100 units is $1,000 and the total cost of producing 101 units is $1,020?
The marginal cost is the extra cost to make one more unit. Other options are incorrect because This answer might come from thinking the cost increase ...
What is the marginal benefit of producing one additional unit of a product if the total benefit increases from $100 to $150?
The marginal benefit is the extra benefit from making one more unit. Other options are incorrect because This answer might come from thinking about th...
In decision-making, how does understanding marginal cost influence a company's production choices?
Knowing the extra cost of making one more item helps a company decide if it's worth it. Other options are incorrect because Some might think that unde...
A small town is considering building a new community center. The estimated marginal cost of building the center is $300,000, while the expected marginal benefit from increased community activities and potential revenue is estimated at $500,000 annually. If the town council is evaluating whether to proceed with the project, which of the following considerations would best support their decision based on marginal cost and benefit analysis?
The benefits of the project are greater than the costs. Other options are incorrect because This option suggests that high costs alone mean the projec...
A city is considering building a new public park. The estimated marginal benefit from increased community happiness and property values is $500,000, while the marginal cost of construction and maintenance is projected to be $300,000. Based on marginal cost and benefit analysis, how should the city categorize this decision?
The benefits of the park are greater than the costs. Other options are incorrect because This option focuses only on costs; Delaying might miss out on...
If a student decides to study an extra hour for an exam and finds that their exam score increases significantly, what is the most likely cause of this increase in score?
Studying more helps you understand the material better. Other options are incorrect because Thinking the questions were easier suggests you didn't pre...
Order the steps in conducting a marginal cost and benefit analysis to make an informed economic decision.
The first step is to clearly identify the decision you need to make. Other options are incorrect because Some might think you should assess costs and ...
In marginal cost and benefit analysis, the decision to pursue an additional unit of a good or service should be based on whether the marginal ______ exceeds the marginal cost.
You should only produce more if the extra benefit is greater than the extra cost. Other options are incorrect because Some might think that if the ext...
A company is considering increasing production of a product. If the marginal benefit of producing one additional unit is $50 and the marginal cost is $30, what should the company do?
The company should increase production. Other options are incorrect because Some might think reducing production saves money; Maintaining the same pro...
Which of the following statements accurately describe the implications of marginal cost and benefit analysis in economic decision-making? Select all that apply.
All the statements provided misunderstand key ideas about marginal cost and benefit analysis. Other options are incorrect because This suggests that b...
When deciding whether to produce one more unit of a good, under what condition should a firm proceed?
A firm should make one more unit if the extra benefit is greater than the extra cost. Other options are incorrect because Some might think lower total...
Marginal cost is to decision-making as opportunity cost is to what?
Opportunity cost helps us see what we give up when we make a choice. Other options are incorrect because Calculating total expenses is about adding up...
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