Reference no: EM131126044

The Marginal Principle

1) The extra benefit resulting from a small increase in an activity is called the
A) opportunity cost.
B) marginal benefit.
C) marginal cost.
D) diminishing returns of the activity.

2) The additional cost resulting from a small increase in some activity is called the
A) opportunity cost.
B) marginal benefit.
C) marginal cost.
D) diminishing returns of the activity.

3) The principle that individuals and firms pick the activity level where the incremental benefit of that activity equals the incremental cost of that activity is known as the
A) marginal principle.
B) principle of opportunity cost.
C) principle of diminishing returns.
D) spillover principle.

4) The marginal principle implies that an individual should produce or consume where
A) marginal benefit exceeds marginal cost.
B) marginal benefit is less than marginal cost.
C) marginal benefit equals marginal cost.
D) total benefit equals total cost.

5) Joe runs a business and needs to decide how many hours to stay open. Figure 2.2 illustrates his marginal benefit of staying open for each additional hour. Suppose that Joe's marginal cost of staying open per hour is $24. How many hours should Joe stay open?
A) 3 hours
B) 4 hours
C) 5 hours
D) 6 hours

6) Joe runs a business and needs to decide how many hours to stay open. Figure 2.2 illustrates his marginal benefit of staying open for each additional hour. Suppose that Joe's marginal cost of staying open per hour is $32. How many hours should Joe stay open?
A) 4 hours
B) 5 hours
C) 6 hours
D) 7 hours

7) Joe runs a business and needs to decide how many hours to stay open. Figure 2.2 illustrates his marginal benefit of staying open for each additional hour. Suppose that we observe Joe staying open 5 hours per day. If he is following the marginal principle, what must his marginal cost per hour be?
A) $16
B) $24
C) $32
D) $40

8) Joe runs a business and needs to decide how many hours to stay open. Figure 2.2 illustrates his marginal benefit of staying open for each additional hour. Suppose that we observe Joe staying open 3 hours per day. If he is following the marginal principle, what must his marginal cost per hour be?
A) $24
B) $32
C) $40
D) $48

9) Joe runs a business and needs to decide how many hours to stay open. Figure 2.2 illustrates his marginal benefit of staying open for each additional hour. Suppose that we observe Joe staying open 6 hours per day. If he is following the marginal principle, what must his marginal cost per hour be?
A) $16
B) $24
C) $32
D) $48

Hours of Operation Marginal Cost
1 6
2 12
3 18
4 24
5 30
6 36
7 42

Table 2.2

10) Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that Krystal's marginal benefit of staying open per hour is $30. If she is following the marginal principle, how many hours should Krystal stay open?
A) 4 hours
B) 5 hours
C) 6 hours
D) 7 hours

11) Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that Krystal's marginal benefit of staying open per hour is $18. If she is following the marginal principle, how many hours should Krystal stay open?
A) 3 hours
B) 4 hours
C) 6 hours
D) 7 hours

12) Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Krystal staying open 4 hours per day. If she is following the marginal principle, what must her marginal benefit be?
A) $12
B) $18
C) $24
D) $30

13) Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Krystal staying open 2 hours per day. If she is following the marginal principle, what must her marginal benefit be?
A) $6
B) $12
C) $15
D) $18

14) Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Krystal staying open 5 hours and her marginal benefit of staying open per hour is $18. If she is following the marginal principle, Krystal should
A) stay open 2 more hours.
B) stay open 3 more hours.
C) stay open 2 fewer hours.
D) stay open 3 fewer hours.

15) Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Krystal staying open 5 hours and her marginal benefit of staying open per hour is $36. If she is following the marginal principle, Krystal should
A) stay open 1 more hour.
B) stay open 2 more hours.
C) stay open 1 fewer hour.
D) stay open 2 fewer hours.

16) Considering how a change in one variable affects the value of another variable is called
A) the Peter Principle.
B) the marginal principle.
C) the principle of supply and demand.
D) functional decision making.

17) When referring to "marginal" changes, the economic focus is on
A) changes which affect only a few people or products.
B) large changes on the low end.
C) graduated changes on the high end.
D) small or incremental changes.

18) When deciding whether to engage in an activity or how much to do, people should follow
A) the principle of microeconomics.
B) the principle of macroeconomics.
C) the marginal principle.
D) the law of supply and demand.

Recall the Application about why people walk up stairs but not escalators to answer the following question(s).

19) Weighing the benefits and costs of walking up an escalator versus standing still on an escalator addresses the economic concept known as
A) the principle of opportunity cost.
B) the marginal principle.
C) the principle of voluntary exchange.
D) the principle of diminishing returns.

20) Walking up an escalator as opposed to standing still on an escalator makes sense if the ________ of walking is less than the ________ of walking.
A) marginal benefit; marginal cost
B) marginal cost; marginal benefit
C) marginal benefit; opportunity cost
D) marginal cost; opportunity cost