Unit 1: CFA 2 (Standard 2) Review

What is the definition of marginal benefit in economics?

• The total benefit received from consuming all units of a good

• The additional benefit received from consuming one more unit of a good

• The total cost of producing a good

• The additional cost of producing one more unit of a good

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GA.9-12.SSEF2

Which term describes the additional cost incurred from producing one more unit of a good?

• Total cost

• Marginal cost

• Fixed cost

• Sunk cost

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What does it mean when marginal benefit equals marginal cost?

• The action should not be taken

• The action is irrational

• The action is rational

• The action is impossible

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Which of the following is an example of a positive incentive for individuals?

• A tax on cigarettes

• A fine for littering

• A scholarship for good grades

• A penalty for late library books

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Who can respond to incentives in predictable ways according to economic theory?

• Only individuals

• Only businesses

• Only governments

• Individuals, businesses, and governments

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If the marginal cost of producing a product is 5 and the marginal benefit is 7, what should a rational business do?

• Stop production

• Increase production

• Decrease production

• Ignore the costs and benefits

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A government offers a tax credit for installing solar panels. What type of incentive is this?

• Negative incentive

• Positive incentive

• No incentive

• Marginal incentive

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A student is deciding whether to study for one more hour. The marginal benefit is a higher test score, and the marginal cost is less time to relax. If the student chooses to study, what does this indicate?

• The marginal cost is greater than the marginal benefit

• The marginal benefit is greater than or equal to the marginal cost

• The student is acting irrationally

• The student is ignoring incentives

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GA.9-12.SSEF2

Which of the following best illustrates a negative incentive for businesses?

• A government grant for hiring new employees

• A tax on pollution emissions

• A bonus for meeting sales targets

• A discount for early payment

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A company is considering whether to produce an additional unit of a product. The marginal cost is 10 and the marginal benefit is 8. What is the rational decision?

• Produce the additional unit

• Do not produce the additional unit

• Increase production significantly

• Ignore marginal analysis

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GA.9-12.SSEF2