Q: Suppose the marginal benefit (MB) and marginal cost (MC) of producing a good are given by $$MB = 100 - 2Q$$ and $$MC = 20 + Q$$, where $$Q is $$the quantity produced. What is the optimal quantity to produce?

$$MB = MC$$ \n $$100 - 2Q = 20 + Q$$ \n $$80 = 3Q$$ \n $$Q = \frac{80}{3} \approx 26.67$$

Question 1

Maddie can spend her Saturday afternoon working a shift at her job (earning $$80), studying for an exam (worth 12 points, 0$$), or attending a concert (tickets cost $$45, and she values the experience at 120). $$What is the opportunity cost of Maddie working her shift?

Accepted Answer

$75, which is the net benefit she would have received from attending the concert instead.

Question 2

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone when a choice is made.

Question 3

Suppose a city government wants to reduce the use of plastic bags. Which of the following is an example of a market-based incentive?

Accepted Answer

Imposing a $0.10 tax on each plastic bag used.

Question 4

A student is deciding whether to study for an extra hour or go to a movie. The marginal benefit of studying is an increase of 3 points on the exam, and the marginal cost is missing a movie valued at $$10. If the student values each exam point at 4$$, what should the student do?

Accepted Answer

Study for an extra hour, because the marginal benefit ($$12) exceeds the marginal cost (10).$$

Question 5

Which of the following statements best illustrates the idea that 'people respond to incentives'?

Accepted Answer

A store offers a discount on reusable bags, leading more customers to bring their own bags.

Question 6

Suppose the marginal benefit (MB) and marginal cost (MC) of producing a good are given by $$MB = 100 - 2Q$$ and $$MC = 20 + Q$$, where $$Q is $$the quantity produced. What is the optimal quantity to produce?

Accepted Answer

$$MB = MC$$ 
 $$100 - 2Q = 20 + Q$$ 
 $$80 = 3Q$$ 
 $$Q = \frac{80}{3} \approx 26.67$$

Question 7

Which of the following is an example of an unintended consequence of a policy?

Accepted Answer

Giving away free condoms increases sexual activity, leading to more births.

Question 8

If the marginal benefit curve is downward sloping and the marginal cost curve is upward sloping, what does this imply about optimal decision-making?

Accepted Answer

The optimal quantity is where marginal benefit equals marginal cost.

Question 9

A university offers free grilled cheese sandwiches during exam week. According to economic reasoning, what is the cost to a student who chooses to eat the sandwich?

Accepted Answer

The value of the next best alternative use of their time.

Question 10

Which of the following best describes a rational decision according to economic theory?

Accepted Answer

A decision where the marginal benefit is at least as great as the marginal cost.

Question 11

Suppose a government bans the use of plastic bags. What type of incentive is this?

Accepted Answer

Command-based incentive.

Question 12

If the marginal benefit of consuming an additional unit of a good is less than the marginal cost, what should a rational consumer do?

Accepted Answer

Consume less of the good.

Question 13

Which of the following is NOT a key economic idea discussed in the study materials?

Accepted Answer

People always act altruistically.

Question 14

A student faces the following options for an evening: work for 3 hours at $$15/hour, attend a concert (ticket costs 30$$, valued at $$60), or study for an exam (expected to improve grade by 5 points, each point valued at 6). $$What is the opportunity cost of attending the concert?

Accepted Answer

$45, which is the net benefit from working.

Question 15

If a policy is designed to reduce teen pregnancy by providing free contraceptives, but it results in an increase in sexual activity and more births, this is an example of:

Accepted Answer

An unintended consequence.

Question 16

Suppose the marginal benefit of a good is given by $$MB = 50 - Q$$ and the marginal cost is $$MC = 10 + 2Q. $$What is the optimal quantity to consume?

Accepted Answer

$$MB = MC$$ 
 $$50 - Q = 10 + 2Q$$ 
 $$40 = 3Q$$ 
 $$Q = \frac{40}{3} \approx 13.33$$

Question 17

Which of the following is a correct statement about marginal benefit and marginal cost curves?

Accepted Answer

Marginal benefit typically decreases as quantity increases, while marginal cost typically increases as quantity increases.

Question 18

A city introduces a $5 fee for every plastic bag used at grocery stores. What economic principle is being applied?

Accepted Answer

People respond to incentives.

Question 19

If a person chooses to spend time volunteering instead of working a job that pays $20/hour, what is the opportunity cost of volunteering for 3 hours?

Accepted Answer

$60, which is the forgone wage from not working.

Opportunity Cost and Key Economic Principles

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