Q: In marginal analysis, what is the condition for choosing the optimal option?

$\text{Marginal Benefit} = \text{Marginal Cost}$

Question 1

Which of the following best describes optimization using total value?

Accepted Answer

Calculating the total value of each feasible option and picking the one with the highest total value.

Question 2

Suppose you are deciding how many hours to spend watching videos on your tablet. The net benefit for 2 hours is $30, for 3 hours is $25, and for 4 hours is $0. According to optimization using total value, how many hours should you spend?

Accepted Answer

2 hours

Question 3

Which statement about optimization using total value and marginal analysis is correct?

Accepted Answer

Both techniques yield identical answers when applied correctly.

Question 4

In marginal analysis, what is the condition for choosing the optimal option?

Accepted Answer

$	ext{Marginal Benefit} = 	ext{Marginal Cost}$

Question 5

A student is deciding how many hours to study. The marginal benefit of the third hour is $20, and the marginal cost is $25. Should the student study the third hour?

Accepted Answer

No, because marginal cost exceeds marginal benefit.

Question 6

Which of the following is NOT a reason why making the best choice may still result in a bad outcome?

Accepted Answer

Having perfect information

Question 7

In the context of game theory, what is a Nash equilibrium?

Accepted Answer

A situation where each player chooses a strategy that maximizes their payoff, given the strategies of others.

Question 8

If the marginal benefit of moving from 2 to 3 hours of tablet use is $20 and the marginal cost is $25, what is the marginal net benefit?

Accepted Answer

$-5$

Question 9

A firm faces marginal revenue $MR = 28 - Q$ and marginal cost $MC = 4 + Q$. What is the profit-maximizing output $Q^*$?

Accepted Answer

$Q^* = 12$

Question 10

Which of the following is a real-world example of a zero-sum game?

Accepted Answer

Rock-paper-scissors

Question 11

Suppose the net benefit of using a new tablet for 3 hours is $40$, and for 4 hours is $25$. What does marginal analysis suggest about increasing usage from 3 to 4 hours?

Accepted Answer

It is not optimal because net benefit decreases.

Question 12

In the prisoners’ dilemma, why do both players often choose to defect even though cooperation would yield a better outcome?

Accepted Answer

Because each player’s best response is to defect, given the other’s strategy.

Question 13

If a player’s strategy is a best response to the equilibrium strategies of other players, what does this imply?

Accepted Answer

The player is in a Nash equilibrium.

Question 14

Which step is NOT part of marginal analysis for optimization?

Accepted Answer

Choose the alternative with the highest total cost.

Question 15

If the total benefit for 2 hours of tablet use is $70$ and the total cost is $40$, what is the net benefit?

Accepted Answer

$30$

Question 16

Which of the following is NOT a feature of a formalized game in game theory?

Accepted Answer

Random assignment of outcomes

Question 17

In the context of the scrolling tablet example, what does the net benefit curve show as hours increase from 0 to 4?

Accepted Answer

Net benefit increases then decreases, showing an optimal point.

Question 18

If you have limited information when making a choice, what is most likely to happen?

Accepted Answer

You may not make the best feasible choice.

Question 19

Which of the following is a step in optimization using total value?

Accepted Answer

Calculate the total net benefit of each alternative.

Optimization, Game Theory, and Equilibrium in Microeconomics

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