Question 1

Marginal analysis involves undertaking an activity
A) until its marginal costs start declining.
B) only when its marginal benefits are positive.
C) until its marginal benefits equal marginal costs.
D) only if its marginal costs are greater than its marginal benefits.

Accepted Answer

Marginal analysis involves comparing the marginal benefits and marginal costs of taking an action. The optimal level of activity occurs when the marginal benefits equal the marginal costs. Therefore, the correct choice is C.

Question 2

DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40,and he charges $75 for this service.For a total price of $90,DeShawn will also detail the car's engine,a service that adds an additional $20 to the total cost of the package.What is DeShawn's marginal benefit if he sells a basic detailing package?
A) $35
B) $75
C) He makes a marginal loss of $15, not a marginal benefit.
D) The marginal benefit cannot be determined.

Accepted Answer

The answer of DeShawn's Detailing is a service that details...

Question 3

Soo Jin shares a one-bedroom apartment with her classmate.Her share of the rent is $700 per month.She is considering moving to a studio apartment which she will not have to share with anyone.The studio apartment rents for $950 per month.Recently,you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment.Soo Jin is as rational as any other person.As an economics major,you rightly conclude that
A) Soo Jin did not have a choice; her roommate was a slob.
B) Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250.
C) Soo Jin figures that the benefit of having her own place (as opposed to sharing) is at least $950.
D) the cost of having one's own space outweighs the benefits.

Accepted Answer

Soo Jin must have made the decision to move based on a rational assessment of the costs and benefits. Since she was paying $700 to share a one-bedroom apartment, moving to a studio apartment for $950 would only make sense if the additional benefit of having her own place is at least $250 (i.e. $950 - $700 = $250). Therefore, B is the best choice.

Question 4

If the marginal cost of keeping a doctor's office open one additional hour per day is $200,then the doctor should keep the office open for one extra hour
A) only if the marginal benefit she receives is greater than $200 plus an acceptable profit margin.
B) as long as the marginal benefit she receives is just equal to or greater than $200.
C) as long as the marginal cost does not rise.
D) until the marginal benefit she receives reaches zero.

Accepted Answer

The answer of If the marginal cost of keeping a...

Question 5

DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40,and he charges $75 for this service.For a total price of $90,DeShawn will also detail the car's engine,a service that adds an additional $20 to the total cost of the package.What is the marginal cost of adding the engine detailing to the basic detailing package?
A) $20
B) $30
C) $60
D) $60 plus the value of his time

Accepted Answer

Marginal cost is calculated as the additional cost incurred for producing one more unit or providing an additional service. In this case, the marginal cost of adding the engine detailing to the basic detailing package would be $20, as this is the additional cost incurred for providing this service.

Question 6

Table 1-1
  
Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour.
-Refer to Table 1-1.What is Lydia's marginal benefit if she decides to stay open for two hours instead of one hour?
A) $25
B) $50
C) $75
D) $125

Accepted Answer

The answer of Table 1-1
  
Lydia runs a small...

Question 7

An economic model is a simplified version of reality used to analyze real-world economic situations.

Accepted Answer

An economic model is a simplified version of reality that helps economists to understand and analyze real-world economic situations. It is not an exact representation of reality, but rather a tool used to simplify complex situations and make them easier to understand and analyze.

Question 8

The revenue received from the sale of ________ of a product is a marginal benefit to the firm.
A) an additional unit
B) the total number of units
C) no units
D) only profitable units

Accepted Answer

Marginal benefit refers to the increase in revenue or benefit received from producing an additional unit of a product. Therefore, the revenue received from the sale of an additional unit of a product is a marginal benefit to the firm.

Question 9

The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal benefit.

Accepted Answer

Marginal benefit refers to the additional benefit received from the sale of one more unit of goods, while marginal revenue refers to the additional revenue received from the sale of one more unit of goods. In this case, the question is asking about sales revenue, which is associated with marginal revenue, not marginal benefit.

Question 10

Table 1-1
  
Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour.
-Refer to Table 1-1.Using marginal analysis,determine how many hours should Lydia extend her nail salon's hours of operations?
A) 2 hours
B) 3 hours
C) 4 hours
D) 5 hours
E) 6 hours

Accepted Answer

The answer of Table 1-1
  
Lydia runs a small...

Question 11

Making optimal decisions "at the margin" requires
A) making decisions according to one's whims and fancies.
B) making consistently irrational decisions.
C) weighing the costs and benefits of a decision before deciding if it should be pursued.
D) making borderline decisions.

Accepted Answer

Making optimal decisions "at the margin" means considering the incremental costs and benefits of a decision. This requires weighing the costs and benefits and making a decision based on whether the benefits outweigh the costs or vice versa. Choices A, B, and D do not accurately reflect this process.

Question 12

The extra cost associated with undertaking an activity is called
A) net loss.
B) marginal cost.
C) opportunity cost.
D) foregone cost.

Accepted Answer

Marginal cost is the additional cost incurred when additional units of an activity are undertaken. Therefore, it is the correct answer. Net loss refers to the total cost exceeding the total revenue, opportunity cost refers to the benefits foregone when choosing one option over another, and foregone cost refers to the cost of the best alternative forgone.

Question 13

Scenario 1-1
Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."
-Refer to Scenario 1-1.Using marginal analysis terminology,what is another economic term for the incremental cost of producing the last 3,000 cell phones?
A) marginal cost
B) operating cost
C) explicit cost
D) Any of the above terms are correct.

Accepted Answer

The incremental cost of producing the last 3,000 cell phones is referred to as the marginal cost. This is because it is the cost of producing one additional unit, which in this case is 3,000 cell phones.

Question 14

Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Accepted Answer

Scarcity is a fundamental economic problem that arises due to the gap between our unlimited wants and the limited resources available to satisfy those wants. It is a universal phenomenon that applies to individuals, businesses, and countries alike.

Question 15

Scarcity is a problem that will eventually disappear as technology advances.

Accepted Answer

Scarcity is a fundamental economic problem that arises due to unlimited human wants and limited resources. While technology can help improve production efficiency and create new resources, it cannot eliminate scarcity completely. As the population grows, the demand for resources will continue to increase, even if technology advances. Thus, scarcity is a problem that is unlikely to disappear.

Question 16

Scenario 1-1
Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."
-Refer to Scenario 1-1.Using marginal analysis terminology,what is another economic term for the incremental revenue received from the sale of the last 3,000 cell phones?
A) gross earnings
B) marginal revenue
C) sales revenue
D) gross profit

Accepted Answer

Marginal revenue is the incremental revenue received from selling an additional unit, in this case the last 3,000 cell phones.

Question 17

Table 1-1
  
Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour.
-Refer to Table 1-1.What is Lydia's marginal cost if she decides to stay open for two hours instead of one hour?
A) $10
B) $20
C) $25
D) $40

Accepted Answer

The answer of Table 1-1
  
Lydia runs a small...

Question 18

DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40,and he charges $75 for this service.For a total price of $90,DeShawn will also detail the car's engine,a service that adds an additional $20 to the total cost of the package.Should DeShawn continue to offer the engine detailing service?
A) yes, he still makes a profit by selling the engine detailing service with the basic detailing package
B) yes, but only if he raises the price of the basic detailing package
C) no, his marginal benefit is less than his marginal cost
D) More information is needed for DeShawn to make this decision.

Accepted Answer

The answer of DeShawn's Detailing is a service that details...

Question 19

Making "how much" decisions involve
A) calculating the total benefits of the activity and determining if you are satisfied with that amount.
B) calculating the total costs of the activity and determining if you can afford to incur that expenditure.
C) calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that activity.
D) determining the additional benefits and the additional costs of that activity.

Accepted Answer

Making "how much" decisions involves determining the additional benefits and the additional costs of that activity. This allows for a comparison of the marginal costs and marginal benefits, which is necessary to determine whether the activity is economically feasible or not.

Question 20

Scenario 1-1
Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."
-Refer to Scenario 1-1.Had the firm not produced and sold the last 3,000 cell phones,would its profit be higher or lower,and if so by how much?
A) Its profit will be $6,700 higher.
B) Its profit will be $700 higher.
C) Its profit will be $700 lower.
D) Its profit will be $6,000 lower.

Accepted Answer

The answer of Scenario 1-1
Suppose a cell phone manufacturer currently...

Quiz 1: Economics: Foundations and Models

Marginal analysis involves undertaking an activity

If the marginal cost of keeping a doctor's office open one additional hour per day is $200,then the doctor should keep the office open for one extra hour

An economic model is a simplified version of reality used to analyze real-world economic situations.

The revenue received from the sale of ________ of a product is a marginal benefit to the firm.

The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal benefit.

Making optimal decisions "at the margin" requires

The extra cost associated with undertaking an activity is called

Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Scarcity is a problem that will eventually disappear as technology advances.

Making "how much" decisions involve