1.5 Rational Decision Making and Marginal Analysis

Multiple Choice

What assumption do economist make about why people take the actions they do?

• People take actions to maximize their benefit based on rational decision-making.

• People act based on emotional responses and instincts.
• Individuals make choices to avoid any form of risk.
• Actions are taken primarily to conform to social norms.

Multiple Select

What is an incentive?

• An incentive is a motivation or reward that encourages specific behaviors or actions.

• An incentive is a penalty that discourages unwanted behaviors.
• An incentive is a fixed cost associated with a service.
• An incentive is a random event that has no impact on actions.

Multiple Choice

What is the definition of Cost-Benefit Analysis?

• A process to evaluate risks

• A decision-making process comparing costs and benefits

• A method for financial forecasting

• A strategy for marketing analysis

Multiple Select

In which scenarios would you most likely use cost-benefit analysis?

• Deciding whether or not to go to college

• Deciding how much time to spend studying

• Deciding whether or not to go to the mall

• Deciding how many employees to hire

Multiple Choice

What does the term "Marginal" mean in the context of Marginal Analysis?

• Additional

• Total

• Average

• Fixed

Multiple Select

In which scenarios would you most likely use marginal analysis?

• Deciding whether or not to hire a 3rd employee

• Deciding how many hours to study

• Deciding whether or not to go to college

• Deciding where to eat

Multiple Select

What is the difference between Cost-Benefit and Marginal Analysis?

• Cost-Benefit focuses on yes/no decisions

• Marginal Analysis focuses on how many decisions

• Both are used for economic decisions

• Cost-Benefit is more complex than Marginal Analysis

Multiple Choice

When is the last time you should make a decision according to marginal analysis?

• MB > MC

• MB = MC

• Always stop

• MC > MB

Multiple Choice

What is the definition of Marginal Utility?

• The total satisfaction from all units consumed

• The additional satisfaction from consuming one more unit

• The satisfaction from the first unit consumed

• The difference between total and average utility

Multiple Choice

What does the Law of Diminishing Marginal Utility state?

• The more you consume, the more satisfaction you get from each additional unit.

• The more you consume, the less satisfaction you get from each additional unit.

• Marginal utility remains constant regardless of consumption.

• Marginal utility increases with each additional unit consumed.