The principle of marginal analysis refers to:
a. a method of analysis that divides large problems into smaller, more manageable ones.
b. the notion that problems facing a group of individuals can be effectively analyzed by focusing on only a small subsample of the group.
c. the result that the optimal quantity of an activity is that at which marginal benefit is equal to marginal cost.
d. the result that the optimal quantity of an activity is that at which the net benefit of the representative, or marginal, individual is maximized.
c. the result that the optimal quantity of an activity is that at which marginal benefit is equal to marginal cost.
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Answer the following statement(s) true (T) or false (F)
1. A parallel shift in the budget line is caused by changes in the relative prices of the two goods. 2. Parallel shifts in the budget line are considered when deriving the demand curve for a good. 3. An Engel curve shows the relationship between price and quantity demanded. 4. Normal goods have upward-sloping Engel curves. 5. If an Engel curve is downward sloping, then one of the two goods must be inferior.
The market value of domestic production is equal to the total expenditure on domestic agents:
A) plus the expenditure of foreign agents on exports minus gross investment by the foreign firms. B) plus the expenditure of foreign agents on exports minus domestic expenditure on imports. C) plus domestic expenditure on imports. D) plus domestic expenditure on imports minus the expenditure of foreign agents on exports.
A country produces only apples and bananas. Moving from point A to point B along its production possibilities frontier, 5 apples are forgone and 4 bananas are gained. What is the opportunity cost of a banana?
A) 1 banana B) 5/4 of an apple C) 4 apples D) 4/5 of an apple E) None of the above answers is correct.
In the figure above, the elasticity of demand facing the monopoly equals one when it produces ________ units of output
A) h B) j C) k D) none of the above