Which of the following statements reflects marginal decision-making?

• A. A company sets its production level based on last year's output.
• B. A government increases taxes to balance the budget.
• C. A firm decides to hire one more worker because the additional revenue from hiring exceeds the additional cost.
• D. A consumer chooses to buy a product because it is on sale.

Answer: (C)

Verified step by step guidance

1. Understand the concept of marginal decision-making: it involves comparing the additional (marginal) benefits and additional (marginal) costs of a decision to determine the best course of action.
2. Analyze each statement to see if it involves a decision based on marginal changes rather than total or past values.
3. The first statement (setting production based on last year's output) relies on past data, not marginal analysis, so it does not reflect marginal decision-making.
4. The second statement (government increasing taxes to balance the budget) is a policy decision but does not explicitly involve weighing marginal benefits against marginal costs.
5. The third statement (a firm deciding to hire one more worker because the additional revenue exceeds the additional cost) directly compares marginal benefit (additional revenue) and marginal cost (additional cost), which is the essence of marginal decision-making.