Economics Quiz

What is marginal analysis in economics?

• A method to determine the overall cost of a project

• A process to analyze the benefits and costs of small changes in actions

• A strategy to calculate sunk costs in business decisions

• An approach to evaluate the emotional impact of financial decisions

What are sunk costs?

• Costs that are expected to be incurred in the future

• Investments that cannot be recovered

• Profits gained from a business venture

• Additional costs that occur due to an action

According to the text, when should an action be repeated in marginal analysis?

• When the sunk costs are higher than the benefits

• When the benefits are equal to the costs

• When the benefits exceed the costs

• When the costs are accrued or added up over time

Why was the decision about further funding for the Hubble Space Telescope not considered an "economic" decision?

• Because it was based on marginal analysis

• Because it involved emotions and experiences of elected officials

• Because it was solely based on scientific facts

• Because it did not involve any sunk costs

Scarcity forces individuals, firms, and governments to make choices. How do rational decision makers make decisions?

• By always considering sunk costs

• By only considering emotional costs

• By using marginal analysis to weigh benefits and costs

• By making decisions based on the highest initial benefit

Are human beings always rational in their decision making? What other factors play a role?

• Yes, humans are always rational and only consider economic factors

• No, emotions, experiences, and perceptions also influence decisions

• No, decisions are solely based on sunk costs

• Yes, humans never allow sunk costs to influence their decisions

How do individuals violate the concept of thinking at the margin?

• By always choosing the option with the least effort involved

• By considering sunk or emotional costs in their decision-making

• By strictly following marginal analysis without exceptions

• By only focusing on the benefits and ignoring the costs

From a non-economic perspective, are violations of thinking at the margin necessarily a bad thing? Give an example of a violation and determine whether it's appropriate or not.

• Yes, because it always leads to inefficient decision-making

• No, because sometimes emotional or personal values are important

• Yes, because it means ignoring all costs

• No, because it always results in the most economical use of resources