Q: Which of the following best illustrates the concept of opportunity cost?

Choosing to attend college means giving up the income from a full-time job.

Q: Which of the following statements about rational behavior is correct?

Rational individuals always make decisions that maximize their utility given their constraints.

Q: Which of the following is an example of responding to economic incentives?

A shopper buys more apples when the price drops.

Q: Which of the following best describes allocative efficiency?

Resources are distributed so that marginal benefit equals marginal cost.

Question 1

Which of the following best describes the economic concept that 'people are rational'?

Accepted Answer

Individuals and firms attempt to do their best with the resources they have.

Question 2

A student decides to spend an extra hour studying for an exam instead of watching TV. According to economic theory, this decision is an example of:

Accepted Answer

Responding to economic incentives

Question 3

Which of the following equations represents the key formula for rational decision-making in microeconomics?

Accepted Answer

$Marginal\ Benefit = Marginal\ Cost$

Question 4

Marginal analysis in economics involves:

Accepted Answer

Comparing the additional benefits and additional costs of a decision

Question 5

If the marginal benefit of eating a second slice of pizza is $18 and the marginal cost is $15, what should a rational consumer do?

Accepted Answer

Eat the second slice because $18 > $15$

Question 6

Which of the following is NOT a result of using marginal analysis?

Accepted Answer

Maximizing sunk costs

Question 7

In economics, the term 'marginal' refers to:

Accepted Answer

All of the above

Question 8

A firm is considering hiring one more worker. The marginal benefit of hiring is $100, and the marginal cost is $120. What should the firm do?

Accepted Answer

Not hire the worker because $100 < $120$

Question 9

Which of the following best illustrates the concept of opportunity cost?

Accepted Answer

Choosing to attend college means giving up the income from a full-time job.

Question 10

Suppose a factory manager can increase machine output by 10 units per day by hiring one more worker, but the cost of hiring exceeds the value of the extra output. According to marginal analysis, what should the manager do?

Accepted Answer

Not hire the additional worker

Question 11

Which of the following statements about rational behavior is correct?

Accepted Answer

Rational individuals always make decisions that maximize their utility given their constraints.

Question 12

If a consumer continues to consume a good as long as the marginal benefit is greater than the marginal cost, what is the consumer achieving?

Accepted Answer

Optimum consumption

Question 13

Which of the following is an example of responding to economic incentives?

Accepted Answer

A shopper buys more apples when the price drops.

Question 14

A firm is producing at a point where marginal benefit equals marginal cost. What does this imply?

Accepted Answer

The firm is maximizing profit.

Question 15

Which of the following best describes allocative efficiency?

Accepted Answer

Resources are distributed so that marginal benefit equals marginal cost.

Three Key Economic Ideas: Rationality, Incentives, and Marginal Analysis

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