Marginal Analysis

involves comparing the benefits and costs of producing and consuming additional units of something.

• Looking at the cost of an alternati

• Looking at the benefits of an alter

• Evaluating the cost of an alternati

• Marginal analysis

Which of the following is an example of marginal analysis?

• Buying that XBox you have been wanting for a long time

• Comparing the benefits and costs of exercising for 30 minutes vs. 1 hour.

• Going to a movie

• Eating a huge ice cream sundae

When deciding how much of something to do or buy, people compare the marginal benefit from different levels of the activity to the (a)   .

• average opportunity cost

• marginal opportunity cost

• sunk opportunity cost

• total opportunity cost

When deciding whether to do something, you should always choose the alternative

• where the marginal opportunity cost is greater than the marginal benefit

• where the marginal benefit is greater than the marginal opportunity cost

• that just feels right to you at the moment. Just do it!

Adherence to the principle of marginal analysis entails continuing activities until the

• total benefit exceeds the marginal benefit

• total benefit equals the total cost

• total benefit exceeds the total cost

• marginal benefit equals the marginal cost

• marginal benefit exceeds the marginal cost

Using marginal analysis and the information in the table, how many pairs of socks should you buy?

• 1

• 2

• 3

• 4

According to marginal analysis when should you make a decision?

• the decision is lawful.

• when the costs outweigh the benefits

• the producer makes a profit.

• when the benefits outweigh the costs

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DOK 1

Marginal Analysis

What is marginal analysis and how does it relate to making decisions in economics?

To maximize profit, a firm should produce the quantity at which marginal revenue equals marginal cost unless, in the long run, the firm would

• earn zero economic profit

• earn less than normal profit

• receive a price equal to its marginal revenue

• earn positive accounting profit

• earn positive economic profit

In which of these situations would a manufacturer decide to produce more units of a good?

• The marginal cost is greater than the marginal benefit.

• The marginal cost is less than the marginal benefit.

• The marginal benefit is less than the marginal cost.

• The marginal benefit is equal to the marginal cost.