Marginal thinking is best demonstrated by which of the following scenarios?

• A. A household budgeting its monthly expenses without considering changes in income.
• B. A government choosing to ban all imports to protect domestic industries.
• C. A firm setting its production level based solely on last year's output.
• D. A consumer deciding whether to buy one more slice of pizza based on the additional satisfaction it provides.

Answer: (D)

Verified step by step guidance

1. Understand the concept of marginal thinking: it involves making decisions based on the additional or incremental benefits and costs of a choice, rather than total or average values.
2. Analyze each scenario to see if the decision is made by comparing the extra benefit and extra cost of a small change (marginal change).
3. For the household budgeting without considering changes in income, note that this does not involve marginal analysis because it ignores incremental changes.
4. For the government banning all imports, recognize this is a broad policy decision, not based on marginal benefits or costs of small changes.
5. For the firm setting production based on last year's output, observe that it does not consider the marginal cost or marginal revenue of producing one more unit.
6. For the consumer deciding whether to buy one more slice of pizza, identify that this is a classic example of marginal thinking, as the decision depends on the additional satisfaction (marginal utility) from one more slice.