Which of the following is an example of how marginal thinking works?

• A. A firm calculates its total revenue for the year.
• B. A government sets a fixed budget for healthcare spending.
• C. A consumer decides to buy one more slice of pizza after considering the additional satisfaction it provides compared to its cost.
• D. A student chooses a college based solely on its reputation.

Answer: (C)

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 option to see if it reflects a decision based on comparing marginal benefits and marginal costs.
3. Option 1: 'A firm calculates its total revenue for the year' focuses on total values, not incremental changes, so it does not illustrate marginal thinking.
4. Option 2: 'A government sets a fixed budget for healthcare spending' is about setting a total limit, not about weighing additional benefits versus costs, so it is not marginal thinking.
5. Option 3: 'A consumer decides to buy one more slice of pizza after considering the additional satisfaction it provides compared to its cost' clearly shows marginal thinking, as the consumer compares the marginal benefit (additional satisfaction) to the marginal cost (price) before making the decision.