Question 1

A firm producing cans buys three tons of aluminum per day at $200 per ton. If it buys four tons per day, it receives a quantity discount on all units and pays only $175 per ton. The marginal cost of the fourth ton per day is

Accepted Answer

The marginal cost of the fourth ton is the additional cost incurred by purchasing the fourth ton. Initially, the firm pays $200 per ton for three tons, totaling $600. With the discount, the firm pays $175 per ton for four tons, totaling $700. The additional cost for the fourth ton is $700 - $600 = $100.

Question 2

According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study

Accepted Answer

Marginal analysis suggests that an activity should be pursued if the marginal benefit exceeds the marginal cost.

Question 3

Because information is costly to acquire,

Accepted Answer

People will rationally choose not to become fully informed when making decisions because the cost of acquiring all information may outweigh the benefits.

Question 4

A local restaurant offers an "all you can eat" buffet for $15. Mia eats four servings but leaves half of a fifth helping uneaten. Why?

Accepted Answer

The answer of A local restaurant offers an "all you...

Question 5

When deciding whether to buy a second car, the economic way of thinking indicates that the purchaser should compare

Accepted Answer

The economic way of thinking involves comparing the marginal benefits and marginal costs. In this case, the purchaser should compare the additional benefits of the second car with the additional cost of the second car.

Question 6

Isabella wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Isabella, the marginal cost of the tenth gallon of gasoline is

Accepted Answer

The marginal cost of the tenth gallon is the additional cost incurred by purchasing it. Buying 9 gallons costs $13.50 plus $1 for the car wash, totaling $14.50. Buying 10 gallons costs $15 with a free car wash. The difference is 50 cents.

Question 7

To say that people make marginal decisions means that

Accepted Answer

Marginal decision-making involves evaluating the additional costs and benefits of a decision, rather than the total costs and benefits.

Question 8

If a decision maker uses marginal analysis, then the relevant costs are the

Accepted Answer

Marginal analysis focuses on the additional or incremental costs and benefits of a decision, so the relevant costs are the additional costs associated with the activity or product.

Question 9

While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Kayla notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. For Kayla, the marginal cost of the third taco would be

Accepted Answer

The answer of While waiting in line to buy two...

Question 10

In economics, the term marginal refers to

Accepted Answer

Marginal refers to the change or difference between two alternatives, often used to describe the additional or incremental change resulting from a decision or action, such as marginal cost or marginal benefit.

Question 11

Santiago wants to buy some milk and a box of cereal. If he buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Santiago, the marginal cost of the third quart of milk is

Accepted Answer

The marginal cost of the third quart of milk is the additional cost incurred when buying the third quart. Initially, 2 quarts of milk and cereal cost $2.75. With 3 quarts, the cost is $3.00. The marginal cost of the third quart is $3.00 - $2.75 = $0.25.

Question 12

If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to

Accepted Answer

Charging more than the marginal cost of $100 will cover the additional cost of the passenger and contribute to fixed costs, making it profitable.

Question 13

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless

Accepted Answer

Her decision to continue teaching would change if the marginal cost of teaching increased, making it less attractive compared to the corporate job.

Question 14

While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00, Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75. She thinks to herself, "Is it worth the extra 25 cents to get the medium fries?" To an economist, Sally's decision is an example of

Accepted Answer

Marginal decision making is the process of making decisions based on the additional costs and benefits of a particular action. In this case, Sally is considering whether or not to purchase the value meal, which includes the cheeseburger, medium drink, and medium fries, for $2.75. The marginal cost of purchasing the value meal is $0.25, as this is the difference between the price of the value meal and the price of the cheeseburger and medium drink purchased separately. The marginal benefit of purchasing the value meal is the medium fries, which Sally values at $0.25. Therefore, Sally's decision to purchase the value meal is an example of marginal decision making.

Question 15

A restaurant offers an "all you can eat" meal for $9. Tyrone has eaten three servings and is trying to decide whether or not to go back for a fourth. The economic way of thinking suggests that Tyrone should go back for the fourth serving if and only if

Accepted Answer

Tyrone should go back for the fourth serving if the marginal benefit (additional satisfaction) he gets from it is greater than zero, as the cost of additional servings is already covered by the fixed price of $9.

Question 16

A marginal change usually is a

Accepted Answer

A marginal change refers to a small, incremental adjustment to an existing plan of action.

Question 17

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

Accepted Answer

The additional revenue from the standby passengers exceeds the marginal cost.

Question 18

People are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a new car than they are to purchase a consumer ratings magazine that reviews pens and pencils before buying a new pen or pencil. Which of the following best explains this behavior?

Accepted Answer

The potential financial impact of making a poor decision is much greater with automobiles than with pens or pencils, making it more worthwhile to seek detailed reviews before purchasing.

Question 19

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

The marginal benefit of an extra diamond is perceived to be much higher than that of an extra bottle of water due to its rarity and desirability, which influences people's willingness to pay more for diamonds.

Question 20

Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less than

Accepted Answer

The marginal benefit of adding fertilizer is $20 per acre ($100 - $80). According to marginal analysis, Andre should add fertilizer if the cost is less than the marginal benefit, which is $20 per pound.

Quiz 1: The Economic Approach