#1
What does marginal analysis study?
Additional or incremental changes
ExplanationStudies the effects of small changes on a system or decision.
#2
In economics, what does the law of diminishing marginal utility state?
As the quantity of a good consumed increases, its marginal utility decreases.
ExplanationDecline in satisfaction gained from consuming additional units of a good.
#3
What is the formula for marginal cost?
MC = (Change in Total Cost) / (Change in Quantity)
ExplanationMeasures the cost of producing one additional unit of a good.
#4
What does a negative marginal cost imply?
The firm is making a profit.
ExplanationCost of producing one more unit is less than the revenue gained.
#5
What does the marginal revenue curve look like for a perfectly competitive firm?
Horizontal line
ExplanationEach unit sold earns the same additional revenue.
#6
In production theory, what does the marginal product of labor measure?
The additional output produced by hiring one more unit of labor.
ExplanationChange in output due to employing one more unit of labor.
#7
What does the marginal rate of substitution measure in consumer theory?
The rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility.
ExplanationPreference adjustment between goods while utility remains constant.
#8
Which of the following best describes the concept of opportunity cost?
The value of the next best alternative forgone when a decision is made.
ExplanationThe value sacrificed by choosing one option over another.
#9
What happens to the marginal cost curve when there are economies of scale?
It slopes downward.
ExplanationCost per unit decreases with increased production.
#10
Which of the following is NOT a determinant of the elasticity of demand for a good?
The price of complementary goods.
ExplanationFactors affecting demand responsiveness except for related goods' prices.
#11
What is the relationship between marginal revenue and marginal cost at profit-maximizing output?
Marginal revenue equals marginal cost.
ExplanationOptimal output is where additional revenue equals additional cost.
#12
In managerial economics, what is the significance of the marginal cost curve crossing the average total cost curve at its minimum point?
It indicates the profit-maximizing level of output.
ExplanationPoint of optimal production efficiency and profit.
#13
What does the marginal propensity to save (MPS) measure?
The proportion of income that individuals save.
ExplanationFraction of income set aside instead of spent.