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

If an economic agent is optimizing, what is she doing?

Accepted Answer

Choosing the best feasible option available.

Question 3

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

Accepted Answer

Both techniques yield identical answers.

Question 4

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 5

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

Accepted Answer

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

Question 6

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

Accepted Answer

Perfect knowledge of all outcomes

Question 7

Game theory is most useful for analyzing which type of economic problem?

Accepted Answer

Multi-person decision problems

Question 8

In a Nash equilibrium, each agent:

Accepted Answer

Chooses a strategy that maximizes their benefit given the strategies of every other agent.

Question 9

Given the following benefits and costs for hours spent on a tablet: 1 hour ($35$ benefit, $20$ cost), 2 hours ($70$ benefit, $40$ cost), 3 hours ($90$ benefit, $65$ cost), 4 hours ($100$ benefit, $100$ cost). What is the net benefit for 3 hours?

Accepted Answer

$25$

Question 10

If the marginal benefit of moving from 2 to 3 hours on a tablet is $20$ and the marginal cost is $25$, what is the value of $	ext{MB} - 	ext{MC}$?

Accepted Answer

$-5$

Question 11

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

Accepted Answer

Rock-paper-scissors

Question 12

What does zero-sum thinking ignore in economic interactions?

Accepted Answer

The possibility of mutual gains from trade

Question 13

Suppose a firm’s marginal revenue is given by $MR = 28 - 3Q$ and marginal cost is $MC = 4 + 3Q$. What is the profit-maximizing quantity $Q^*$?

Accepted Answer

$Q^* = 2$

Question 14

In the context of game theory, what is the strategic form of a game?

Accepted Answer

A representation of the payoffs for each possible combination of strategies.

Question 15

Which of the following is NOT a step in marginal analysis?

Accepted Answer

Choose the alternative with the lowest total cost.

Question 16

If a player in a game chooses a strategy that is a best response to the equilibrium strategies of other players, what is this called?

Accepted Answer

Nash equilibrium

Question 17

Suppose the net benefit of using a new tablet for 3 hours is $40$, and for 4 hours is $25$. What does this suggest about the optimal number of hours to use the tablet?

Accepted Answer

3 hours is optimal because net benefit decreases after 3 hours.

Question 18

Which of the following is a key feature of a Nash equilibrium?

Accepted Answer

No player can improve their payoff by unilaterally changing their strategy.

Question 19

In the context of marginal analysis, what is the formula for marginal benefit?

Accepted Answer

$	ext{Marginal Benefit} = 	ext{Change in Benefit}$

Question 20

Which of the following is NOT a real-world application of game theory?

Accepted Answer

Single-person optimization problems

ECN104 Lecture 3

Study Guide - Practice Questions

Study Guide - Flashcards