Making “marginal” decisions involves
a. calculating the total benefits of an activity and determining if you are satisfied with that amount.
b. calculating the total costs of an activity and determining if you can afford to incur that expenditure.
c. comparing the additional benefits and the additional costs of an activity.
d. calculating the average benefit and the average cost of an activity to determine if it is worthwhile to undertake that activity.
Scenario 1-1
Suppose a cell-phone manufacturer currently sells 20,000 cell-phones per week and makes a profit of $5,000 per week. A manager at the plant observes, “Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we’re on the right track. We are producing the optimal number of cell phones.”
6) Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 3,000 cell phones?
a. gross profit
b. marginal revenue
c. gross earnings
d. sales revenue
7) Automobile manufacturers produce a range of automobiles such as sports utility vehicles, luxury sedans, pickup trucks and compact cars. What fundamental economic question are they addressing by making this range of products?
a. How to produce goods that consumers want?
b. What goods and services will be produced?
c. Who to produce automobiles for?
d. Why produce a variety of automobiles?
8) Which of the following contributes to the efficiency of markets?
a. Markets promote equal standards of living.
b. Markets promote competition and voluntary exchange.
c. Governments play an active role in the day-to-day operations of markets.
d. Markets are able to bring about an equitable distribution of goods and services.


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