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Marginal Analysis quiz #3

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  • Making an economically rational decision requires
    Comparing marginal benefits and marginal costs.
  • This chart demonstrates that the marginal cost
    Changes as output increases, often rising after a certain point.
  • The marginal cost of an activity can be found by calculating the change in:
    Total cost from one more unit of activity.
  • Given a revenue function, R = R(q), what is the marginal revenue (MR)?
    MR is the derivative of R with respect to q, or the change in revenue from selling one more unit.
  • Using the demand schedule, what is the marginal revenue (MR) for the 10th unit?
    It is the increase in total revenue from selling the 10th unit.
  • What is the marginal revenue (MR) of the inverse linear demand function, p(q) = a + bq?
    MR is found by differentiating total revenue with respect to quantity.
  • Why is the marginal cost curve the same basic shape, no matter the product?
    Because of the law of diminishing returns, marginal cost eventually rises as output increases.
  • What happens to marginal product when total product is increasing but at a decreasing rate?
    Marginal product is positive but decreasing.
  • Marginal cost can be defined as the change in
    Total cost from producing one more unit.
  • Calculating marginal revenue from a linear demand curve involves
    Finding the change in total revenue from selling one more unit.
  • The marginal propensity to save is equal to a change in (one word) divided by a change in income.
    Saving.
  • Extra or additional revenue associated with the production of an additional unit of output is the:
    Marginal revenue.
  • The increase in total revenue that results from selling one more unit of output is
    Marginal revenue.
  • The change in total revenue that results from selling one more unit of output is called revenue.
    Marginal revenue.
  • Marginal revenue is the additional revenue that an additional unit of output would add to total revenue.
    True.
  • The accompanying graph depicts the marginal cost
    Curve, showing how cost changes with each additional unit produced.
  • The term _____________ is used to describe the additional cost of producing one more unit.
    Marginal cost.
  • Productivity can be illustrated in the formula
    Marginal product = change in output / change in input.
  • Economics involves marginal analysis because
    Optimal decisions require comparing additional benefits and costs.
  • A cost changes in proportion to changes in volume of activity. What is this called?
    Variable cost.
  • The marginal revenue curve faced by a perfectly competitive firm
    Is horizontal at the market price.
  • Calculating marginal revenue from a linear demand curve
    Involves finding the change in total revenue from selling one more unit.
  • The marginal benefit of an activity can be found by calculating the change in:
    Total benefit from one more unit of activity.
  • When marginal revenue equals marginal cost, the firm
    Is maximizing profit.
  • The marginal cost curve shows the relationship between:
    Marginal cost and output.
  • An additional cost from selecting a certain course of action is a(n):
    Marginal cost.
  • If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then
    It should increase output to maximize profit.
  • Making rational decisions at the margin means that people
    Compare the extra benefits and costs of a small change before acting.
  • In economics what is meant by optimal decisions are made at the margin?
    Decisions are made by comparing the additional benefits and costs of one more unit.
  • When marginal revenue product equals marginal resource cost:
    The optimal number of resources is being used.
  • The marginal benefit of consuming a good is
    The extra satisfaction from consuming one more unit.
  • Increasing marginal cost of production explains
    Why firms eventually stop increasing output.
  • Marginal resource cost is
    The additional cost of employing one more unit of a resource.
  • The output of marginal revenue product (MRP) is
    The extra revenue generated by employing one more unit of input.
  • The monopolistically competitive seller maximizes profit by producing at the point where
    Marginal revenue equals marginal cost.
  • What is the marginal cost of washing the 24th car?
    It is the increase in total cost from washing the 24th car.
  • Refer to table 13-3. The marginal product of the second worker is
    The additional output produced by hiring the second worker.
  • The graph shows the marginal social benefit curve. What does this represent?
    The additional benefit to society from consuming one more unit.
  • The marginal product of a factor shows how much an additional unit of a factor adds to
    Total output.
  • The next-best thing that must be forgone in order to produce one more unit of a given product is called:
    Opportunity cost.