Question 1

If it costs Vijay $150 to design 5 Web sites and $175 to design 6 Web sites,then $175 is the marginal cost of producing the 6th Web site.

Accepted Answer

To find the marginal cost of producing the 6th Web site, we need to determine the additional cost of producing the 6th Web site compared to the cost of producing the 5th Web site. 
Cost of producing 5 Web sites = $150 
Cost of producing 6 Web sites = $175 
Therefore, the total cost of producing the 6th Web site is $175, but the additional cost compared to producing the 5th Web site is: 
Marginal cost = Cost of producing 6 Web sites - Cost of producing 5 Web sites 
Marginal cost = $175 - $150 
Marginal cost = $25 
So, the marginal cost of producing the 6th Web site is $25, not $175.

Question 2

Optimal decisions are made at the point where marginal benefit is maximized.

Accepted Answer

Optimal decisions are made at the point where marginal benefit equals marginal cost, not where marginal benefit is maximized.

Question 3

The additional cost to a producer of hiring an additional unit of labor is called the marginal cost.

Accepted Answer

This statement is true. Marginal cost refers to the additional cost required to produce one extra unit of output or to hire one additional unit of labor.

Question 4

The term "market" refers only to trading arrangements that have been approved by the government.

Accepted Answer

The term "market" can refer to any arrangement that facilitates the exchange of goods or services between buyers and sellers, whether it is approved by the government or not.

Question 5

If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps,then the difference of $300 is the marginal cost of producing the 5th lamp.

Accepted Answer

The difference of $300 is the marginal cost of producing the 6th lamp, not the 5th. The cost given is cumulative, so the marginal cost refers to the cost of producing one more unit beyond what has already been produced.

Question 6

The term "market" refers to trading arrangements by which buyers and sellers come together.

Accepted Answer

The definition of market revolves around the concept of buyers and sellers coming together to engage in trade. Therefore, the statement is true.

Question 7

Suppose the extra cost to a pet store of advertising one additional day each week in the local newspaper is $450.Then,the pet store should advertize that one additional day each week if doing so brings in additional revenue of $450 or more each week.

Accepted Answer

If the extra cost of advertising is $450 and the additional revenue generated from that advertising is also $450 or more, then the pet store is essentially breaking even and should still advertise that one additional day each week. Anything above $450 in additional revenue would result in a net profit for the pet store.

Question 8

Explain the economic idea that "people respond to incentives."

Accepted Answer

The answer of Explain the economic idea that "people respond...

Question 9

Marginal benefit refers to the additional benefit that your activity provides to you.

Accepted Answer

Marginal benefit is the additional benefit gained from carrying out an activity or consuming an additional unit of a good or service.

Question 10

What is meant by the statement that "optimal decisions are made at the margin"?

Accepted Answer

The answer of What is meant by the statement that...

Question 11

If it costs Danitra $225 to create 4 necklaces and $275 to create 5 necklaces,then the marginal cost of producing the 5th necklace is $50.

Accepted Answer

To find the marginal cost of producing the 5th necklace, we need to calculate the additional cost of producing one more necklace.

The cost difference between producing 4 necklaces and 5 necklaces is:

$275 - $225 = $50

Therefore, the marginal cost of producing the 5th necklace is $50, making statement A true.

Question 12

Suppose the extra cost to a car wash of advertising one additional day each month on a local radio station is $175.Then,the car wash should advertize that one additional day each month if doing so brings in additional revenue of $175 or more each month.

Accepted Answer

The cost of advertising an additional day is $175. If the additional revenue brought in by advertising for that day is also $175 or more, then the cost of advertising would be covered and there would still be a profit. Therefore, it would be worthwhile for the car wash to advertise on that day.

Question 13

As population declines,scarcity eventually disappears.

Accepted Answer

Scarcity is a fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It does not disappear with population decline, as resources will always be limited and desires potentially unlimited.

Question 14

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

Accepted Answer

An economic model is a simplified version of reality used to analyze real-world economic situations and understand how economies function.

Question 15

Suppose the extra cost for a company to advertize for one extra day each week on a local TV station is $1,500.Then,the company should advertize on that additional day if it can generate total revenue of $1,500 each week.

Accepted Answer

The company should advertise on the additional day only if the revenue generated exceeds $1,500, covering the cost and contributing to profit.

Question 16

All economic questions arise from the fact that resources are scarce.

Accepted Answer

Economics is the study of how society allocates scarce resources to satisfy unlimited wants and needs. This fundamental concept of scarcity gives rise to all economic questions, from how much to produce, to how to distribute goods and services, to how to allocate resources among competing uses.

Question 17

Marginal benefit is the benefit that your activity provides to someone else.

Accepted Answer

Marginal benefit refers to the additional satisfaction or utility that a person receives from consuming an additional unit of a good or service. It is focused on the individual's own gain, not the benefit provided to someone else.

Question 18

Explain the economic assumption that "people are rational."

Accepted Answer

The answer of Explain the economic assumption that "people are...

Question 19

Even if the population declines,scarcity will still exist.

Accepted Answer

Scarcity is not only determined by the size of the population, but also by the availability of resources and their distribution. Even with a smaller population, if resources are scarce and unevenly distributed, scarcity will still exist.

Question 20

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

Accepted Answer

The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal revenue. Marginal cost refers to the additional cost required to produce an additional unit of goods.

Quiz 1: Economics: Foundations and Models