WEEK 2
The table below provides Mountain Mack's production possibilities schedule, which describes various combinations of fishing lures and duck decoys he can carve efficiently in a week. Mountain Mack's Production Possibilities Schedule Fishing Lures Duck Decoys 40 0 32 10 24 20 16 30 8 40 0 50 b. Which of the following combinations of fishing lures and duck decoys is unobtainable to Mountain Mack in one week's worth of carving? multiple choice 1 16 fishing lures and 30 duck decoys 20 fishing lures and 10 duck decoys 40 fishing lures and 0 duck decoys 10 fishing lures and 40 duck decoys
10 fishing lures and 40 duck decoys b. The PPF curve that was drawn shows the maximum amount of fishing lures and duck decoys Mountain Mack can produce efficiently. Any point underneath the PPF curve could also be produced because someone is always capable of producing less, even if it is inefficient. However, points beyond the PPF curve are not possible or are unobtainable because those points are beyond the current abilities of the producer or economy. The combinations 16 fishing lures and 30 duck decoys and 40 fishing lures and 0 duck decoys are both obtainable and efficient because they lie on the PPF curve. Because combination 20 fishing lures and 10 duck decoys lies under the curve, this combination is obtainable but inefficient. The combination 10 fishing lures and 40 duck decoys is beyond or outside the PPF curve and is therefore unobtainable with the current production possibilities.
The table below presents the choices faced by a feudal lord in ancient China. Feudal China's Production Possibilities Terracotta Statues Porcelain Vases 7 35 6 45 5 55 4 65 3 75 What is the opportunity cost of producing the 5th terracotta statue? multiple choice 10 porcelain vases 30 porcelain vases 5 porcelain vases 20 porcelain vases
10 porcelain vases The table shows the possible combinations of statues and vases the feudal lord can produce. Because the feudal lord cannot have all of these combinations, in order to have more statues he must sacrifice the number of vases produced. Likewise, to have more vases he must sacrifice the number of statues produced. In this case, you are asked to find the opportunity cost of the 5th statue. This means the feudal lord must be producing less than 5 statues. So, we can examine the table. It tells us that for every statue, the feudal lord must give up 10 vases. For example, as we move from 4 statues to 5 statues, the number of vases changes from 65 to 55 (or down by 10). This number tells us how many vases we give up for 1 statue. Remember that the opportunity cost of something is what is given up. So, moving from 4 statues to 5 statues would indicate that the 5th statue would require an opportunity cost of 10 vases.
The table below provides Mountain Mack's production possibilities schedule, which describes various combinations of fishing lures and duck decoys he can carve efficiently in a week. Mountain Mack's Production Possibilities Schedule Fishing Lures Duck Decoys 40 0 32 10 24 20 16 30 8 40 0 50 c. Which of the following combinations of fishing lures and duck decoys is an efficient combination? multiple choice 2 50 fishing lures and 0 duck decoys 16 fishing lures and 30 duck decoys 10 fishing lures and 40 duck decoys 20 fishing lures and 10 duck decoys
16 fishing lures and 30 duck decoys c. The PPF curve shows the maximum combinations of goods and services that can be produced efficiently. Points or combinations that lie on the PPF curve are both possible and efficient. For Mountain Mack, the only combination given that lies on the PPF curve is 16 fishing lures and 30 duck decoys. Therefore, that combination is the only combination that is efficient. The other choices are either under the curve and inefficient or outside the curve and unobtainable.
Lucinda collects Kewpie dolls, and can afford to buy up to six dolls. The table below describes the marginal benefit Lucinda gets for each additional doll she adds to her collection. Lucinda's Marginal Benefit of Kewpie Dolls Kewpie Dolls Marginal Benefit (dollars) 1 $15.00 2 12.00 3 9.00 4 6.00 5 3.00 6 0.00 b. If the price of Kewpie dolls rose to $9.00 per doll, how many dolls would Lucinda buy if she is rational? multiple choice 2 · 3 dolls · 4 dolls · 1 doll · 2 dolls
3 dolls b. If the price goes up to $9.00, the marginal cost of each Kewpie doll is now $9.00. Using the marginal decision-making process, as long as MB > MC, Lucinda would want to purchase a Kewpie doll. In this case, Lucinda would want to purchase three dolls, since that is where MB = MC and she would have purchased all of the dolls where MB > MC.
Lucinda collects Kewpie dolls, and can afford to buy up to six dolls. The table below describes the marginal benefit Lucinda gets for each additional doll she adds to her collection. Lucinda's Marginal Benefit of Kewpie Dolls Kewpie Dolls Marginal Benefit (dollars) 1 $15.00 2 12.00 3 9.00 4 6.00 5 3.00 6 0.00 a. If the price of Kewpie dolls is $6.00 per doll, how many dolls would Lucinda buy if she is rational? multiple choice 1 · 4 dolls · 3 dolls · 2 dolls · 1 doll
4 dolls When the price is $6.00, the marginal cost of each Kewpie doll is $6.00. Since Lucinda receives $15.00 worth of MB for the first Kewpie doll and it only costs her $6.00, she would definitely want to buy the first doll. Similarly, for the second and third dolls, the MB exceeds the MC of $6.00, so she would definitely want to buy the second and third dolls as well. For the fourth doll, Lucinda receives $6.00 worth of MB and the cost is $6.00, so MB = MC for the fourth doll. Because MB = MC, she would want to buy the fourth doll as well. She values it at $6.00 and it costs $6.00, so it is worth it to her to have the item and make the purchase. However, the MB of the fifth doll is only $3.00 and the MB of the sixth doll is $0, so with her MC of $6.00, the MB < MC and Lucinda would not want to purchase the fifth or sixth doll. Therefore, if Lucinda is rational, she would want to buy four Kewpie dolls when the price of each Kewpie doll is $6.00.
Emmanuel enjoys growing zucchini in his garden and then selling his produce at the local farmers' market. The table below shows his marginal benefit and marginal cost for each hour he spends in his garden per week. The figure below plots the marginal benefit and marginal cost points. Emmanuel's Marginal Benefit and Marginal Cost of Gardening Hours Spent Gardening Marginal Benefit ($) Marginal Cost ($) 1 $21 $3 2 18 6 3 15 9 4 12 12 5 9 15 6 6 18 7 3 21 a. Given the information above, what is Emmanuel's optimal amount of time spent gardening each week? multiple choice 1 7 hours 0 hours 1 hour 4 hours
4 hours a. Emmanuel optimizes his time spent gardening by choosing a number of hours where the marginal benefit (MB) and marginal cost (MC) are equal. When MB is equal to MC, it means all of the quantities of an activity where MB is greater than or equal to MC have been selected and total benefit is at the maximum level. At a quantity of 4 hours, MB = 12 = MC, and Emmanuel has optimized his time. This can be seen either by looking at the MB and MC columns in the table at 4 hours or on the graph where the MB curve intersects the MC curve. At that point on the graph, both the MB and MC curves are at the level of 12 for 4 hours spent gardening.
Which of the following scenarios most accurately reflects the concept of scarcity? multiple choice The Smith Household produces an average of three bags of trash a week. The steak Henry did not buy because he is a vegetarian. Sienna enjoys viewing flowers in the city garden during her walk. Brett is a farmer with an open field on which he can plant either soybeans or corn.
Brett is a farmer with an open field on which he can plant either soybeans or corn. Scarcity is a condition of existence in which unlimited wants cannot be satisfied by the limited resources that are available. Since resources are scarce, they must be allocated among competing uses. Scarcity is best shown as a farmer with a field that can only be used to produce one good and cannot produce corn and soybeans at the same time. Because there is only one field, the resource is limited and must be allocated to either soybeans or corn, but not both.
According to the circular flow, which two groups interact with each other in the product market? Multiple choice question. Households and firms The U.S. Treasury and the U.S. Mint Firms and government Households and government
Households and firms
A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a(n) 1._____________________ 2.__________________________ 3. _____________________________ (Use one word for each blank.)
Production Possibility Schedule
_________ is/are also called factors of production since they are transformed into output during the production process. Multiple choice question. Resources Outputs Capital Labor
Resources
The table below describes the hourly cost Sam faces as he washes more cars. Sam's Car Wash Costs Cars Washed per Hour Total Cost ($) Marginal Cost ($) 1 $2 $2 2 ____ 4 3 12 ______ 4 ____ 8 5 _____ 10 6 42 ______ Instructions: Enter your answers as a whole number. Complete the missing values in the table.
The table below describes the hourly cost Sam faces as he washes more cars. Sam's Car Wash Costs Cars Washed per Hour Total Cost ($) Marginal Cost ($) 1 $2 $2 2 6 4 3 12 6 4 20 8 5 30 10 6 42 12 Explanation Marginal cost (MC) is the additional cost associated with one more unit of an activity. MC can be found by taking the change in total cost divided by the change in quantity. MC = Change in Total Cost/Change in Quantity To find the total cost at 2 cars washed, you already know the MC ($4), the total cost at 1 car washed ($2), and the change in quantity (2 - 1). But you are looking for part of the change in total cost. Given the values, it sets up the equation as $4 = (Total Cost at 2 Cars Washed - $2)/(2 - 1). Because (2 - 1) = 1, the equation becomes $4 = Total Cost at 2 Cars Washed - $2. To find the answer, use algebra and add $2 to each side to get total cost at 2 cars washed = $4 + $2 = $6. So, the value to input in the blank is 6. To find the MC at 3 cars washed, use the equation MC = Change in Total Cost/Change in Quantity. Therefore, the MC is equal to the change in total cost ($12 - $6) divided by the change in quantity (3 - 2) or MC = ($12 - $6)/(3 - 2) = $6/1 = $6. To find the total cost at 4 cars washed, you already know the MC ($8), the total cost at 3 cars washed ($12), and the change in quantity (4 - 3). But you are looking for part of the change in total cost. Given the values, it sets up the equation as $8 = (Total Cost at 4 Cars Washed - $12)/(4 - 3). Because (4 - 3) = 1, the equation becomes $8 = Total Cost at 4 Cars Washed - $12. To find the answer, use algebra and add $12 to each side to get total cost at 4 cars washed = $8 + $12 = $20. So, the value to input in the blank is 20. To find the total cost at 5 cars washed, you already know the MC ($10), the total cost at 4 cars washed ($20), and the change in quantity (5 - 4). But you are looking for part of the change in total cost. Given the values, it sets up the equation as $10 = (Total Cost at 5 Cars Washed - $20)/(5 - 4). Because (5 - 4) = 1, the equation becomes $10 = Total Cost at 5 Cars Washed - $20. To find the answer, use algebra and add $20 to each side to get total cost at 5 cars washed = $10 + $20 = $30. So, the value to input in the blank is 30. To find the MC at 6 cars washed, use the equation MC = Change in Total Cost/Change in Quantity. Therefore, the MC is equal to the change in total cost ($42 - $30) divided by the change in quantity (6 - 5) or MC = ($42 - $30)/(6 - 5) = $12/1 = $12.
Bob, the owner of a local deli in town, needs to purchase something that economists would label as "capital" to help him produce sandwiches. Which of the following is an example of capital? multiple choice a new idea that automates the making of sandwiches an additional worker ham for the sandwiches a meat slicer to cut ham for sandwiches
a meat slicer to cut ham for sandwiches Capital is all of the tools, machinery, infrastructure, and knowledge used to produce goods and services. Capital is sometimes divided into "physical" and "human" capital. Physical capital refers to tangible items that are created to increase productivity. A meat slicer is an example of physical capital.
Samantha needs to purchase something that economists would label as "labor" to help her produce court documents for her law firm. Which of the following is an example of labor? multiple choice a stenographer who can type courtroom proceedings a stenography machine to type courtroom proceedings filing cabinets to store the typed courtroom documents the ability to see that organizing courtroom documents is an unfilled market need
a stenographer who can type courtroom proceedings Labor is all physical and mental activity devoted to producing goods and services. A stenographer's work is an example of labor.
A production possibilities frontier that illustrates a 1-for-1 trade off between goods is drawn as: Multiple choice question. a straight, upward-sloping line. a straight, downward-sloping line. a vertical line. a horizontal line.
a straight, downward-sloping line.
Economic reasoning is based on the premise that multiple choice only economic decisions or actions have a cost associated with them. all decisions or actions are costless. all decisions or actions have a cost associated with them. only noneconomic decisions or actions have a cost associated with them.
all decisions or actions have a cost associated with them. Because all resources are scarce and must be allocated among competing uses, every decision or action has an opportunity cost. Therefore, all decisions and actions have a cost associated with them, even if no money is required to make the decision.
Which of the following can best be characterized as a subject of microeconomics? multiple choice 2 an examination of monetary policy an examination of consumer behavior an examination of a country's economic growth an examination of an economy's price level
an examination of consumer behavior Microeconomics is the study of the economy at the small-scale level, examining individuals and specific markets. An example would be examining consumer behavior. Because this example is looking at a small component of the economy (only consumer actions), it is a microeconomics subject.
Which of the following can best be characterized as a subject of microeconomics? multiple choice an examination of how much of a particular good gets produced an examination of inflation an examination of an economy's overall level of production an examination of a country's imports and exports
an examination of how much of a particular good gets produced Microeconomics is the study of the economy at the small-scale level, examining individuals and specific markets. An example would be examining how much of a particular good gets produced. Because this example is looking at one small component of the economy, it is a microeconomics subject.
Which of the following can best be characterized as a subject of macroeconomics? multiple choice an examination of how much of a particular good gets produced an examination of consumer behavior an examination of inflation an examination of where goods come from
an examination of inflation Macroeconomics is the study of the economy at the large-scale level, examining total output, the price level, and other aggregate measures of the economy. An example of macroeconomics is inflation. Because inflation measures changes in prices of the whole economy, it is a subject of macroeconomics.
For an entire economy, the production possibilities frontier is going to be: Multiple choice question. a straight line because we have different resources with the same opportunity cost. convex because we have different resources with different opportunity costs. L-shaped because we have different resources with different opportunity costs. bowed out because we have different resources with different opportunity costs.
bowed out because we have different resources with different opportunity costs.
The tools and machines used to produce a good or service are what type of market resource? multiple choice land entrepreneurial ability labor capital
capital Capital is all of the tools, machinery, infrastructure, and knowledge used to produce goods and services. Capital is sometimes divided into "physical" and "human" capital. Physical capital refers to tangible items that are created to increase productivity; human capital refers to the knowledge and skills that people acquire in order to increase productivity.
The simple model of production assumes that the opportunity cost of production is: Multiple choice question. increasing. decreasing. constant. zero.
constant.
Maurice needs to purchase something that economists would label as "land" to help him produce cloth to sell to the fashion industry. Which of the following is an example of land? multiple choice the ability to organize a factory to meet the demand for fabric cotton to be woven into fabric a factory in which to produce fabric new workers trained to run an industrial loom
cotton to be woven into fabric Land is all of the natural resources used in production; sometimes referred to as "gifts of nature." Cotton is a natural resource and therefore an example of land.
When resources are fixed, increasing the production of one good causes a(n) ________________________________(increase/decrease) in the production of the other.
decrease
On a production possibilities frontier (PPF) with Good X on the horizontal axis and Good Y on the vertical axis, we can say that the slope of the PPF (in absolute value) equals the opportunity cost of producing Good X with respect to the production of Good Y. This is true because the slope: Multiple choice question. describes the gains the economy experiences when it trades with another economy. describes the trade-off resulting from the production of Good X in terms of Good Y. is always positive. measures how much of Good X and Good Y can be produced.
describes the trade-off resulting from the production of Good X in terms of Good Y.
The quality of a(n) ____________________________ model can be measured by how well it reflects reality and whether it gives us insights that can be used in the real world.
economics
When resources are allocated in such a way that it is possible to increase the production of one good only by decreasing the production of another, then the allocation of resources is: Multiple choice question. impossible. inefficient. efficient. suboptimal.
efficient
The ability to see a market need and to organize inputs to meet that need is what type of market resource? multiple choice capital labor entrepreneurial ability land
entrepreneurial ability Entrepreneurial ability is the talent or ability to combine land, labor, and capital to produce goods and services. Entrepreneurial ability is different from human capital in that it primarily involves assuming risk and organizing resources into a productive process rather than using resources in production.
In the circular flow model, __________________________ and ___________________________ interact in the resource market and the product market. (Use one word for each blank.)
firms and households
In the circular flow model, households sell resources to and buy products from: Multiple choice question. the government. the product market. firms. other households.
firms.
In the two sector circular flow model, ________ must buy resources from _________ in order to produce the output they will sell to households. Multiple choice question. firms; government firms; households households; firms government; firms
firms; households
Graphing the information in the production possibilities schedule produces the production possibilities: Multiple choice question. line. slope. graph. frontier.
frrontier
In the circular flow model, _____ can obtain the income they need to buy the products they want to consume only by selling their resources. Multiple choice question. households government agencies firms states
households
In the simple circular flow model, firms will buy resources from and sell products to: Multiple choice question. other businesses. foreign countries. the government. households.
households.
In the real world, the opportunity cost of production ______________________ as production increases. (Enter only one word in the blank.)
increases
On a production possibilities frontier (PPF), if you are able to increase the production of both goods at the same time then, initially, resources were allocated _____________________________(Enter one word in the blank.)
inefficiently
Resources are also called: Multiple choice question. outputs because they are transformed into output in the production process. capital because they are transformed into output in the production process. production because they are transformed into output in the production process. inputs because they are transformed into output in the production process.
inputs because they are transformed into output in the production process.
Combinations lying _______________________________ the production possibilities frontier are possible but inefficient with the current resources and technology. (Use one word for the blank.)
inside
Suppose a farmer has three kinds of land for growing peaches; good - better - and best. As the farmer increases production - she will use the best land first - and costs will be low. At some point - she will run out of the best land and will have to start using the better land - and costs will be a little higher. This describes the: Multiple choice question. law of marginal analysis. law of diminishing marginal costs. law of increasing opportunity cost. law of demand.
law of increasing opportunity cost.
When the opportunity cost associated with increasing the production of one good or service in terms of another is constant at every level of production, then the production possibility frontier is: Multiple choice question. hyperbolic. linear. convex. concave.
linear
The law of increasing opportunity costs exists because Multiple choice question. all resources are well-suited for all production. of the difference between absolute advantage and comparative advantage. terms of trade are often different across regions. not all resources are well-suited for all production.
not all resources are well-suited for all production.
Combinations outside of the production possibilities frontier are: Multiple choice question. possible to produce but inefficient. not currently possible to produce. only possible with a reduction in labor. possible to produce and efficient.
not currently possible to produce
The value of the next-best forgone alternative is the ___________________________________cost.
opportunity
__________________________________ cost is most plainly visible when spending more money on one thing as it means that less money can be spent on another thing.
opportunity
Individuals and countries specialize because of differences in: Multiple choice question. opportunity costs. variable costs. fixed costs. total costs.
opportunity costs.
Combinations of production that fall inside the production possibilities frontier are ________________________but not efficient.
possible
The line (or curve) that represents the combinations of the two goods produced on the production possibilities frontier is a boundary between output levels that are __________________________ and output levels that are unattainable. (Remember - use only one word to fill in the blank.)
possible
In the circular flow model, the two markets are the factor market and the: Multiple choice question. money market. governments market. currency market. product market.
product market.
Each row of the tabular __________ illustrates the maximum amount of a good or a service that can be produced given the production of the other. Multiple choice question. production possibilities schedule demand schedule production possibilities curve supply schedule
production possibilities schedule
The production possibilities frontier, or curve, is a graphical representation of the Multiple choice question. production possibilities schedule. production possibilities ladder. production possibilities theory. consumer possibilities schedule.
production possibilities schedule
According to the circular flow diagram, households and firms interact in the ______ and the ______. Multiple choice question. product market; money market exchange market; product market resource market; product market federal market; resource market
resource market; product market
According to the circular flow diagram, households and firms interact in the ______ and the ______. Multiple choice question. resource market; product market exchange market; product market product market; money market federal market; resource market
resource market; product market
In the circular flow model, households can obtain the income they need to purchase the products for consumption only by selling: Multiple choice question. goods and services. resources. output. stocks and bonds.
resources.
A strong economic model allows us to analyze the economic events of the world by: Multiple choice question. employing the resources of the federal government. ignoring the ceteris paribus assumption. replicating the economic world exactly. simplifying a very complex economic world.
simplifying a very complex economic world.
The __________________________ of the production possibilities frontier equals the trade-off of the production of one good or service in terms of the other.
slope
The opportunity cost of producing a good or a service can be found by: Multiple choice question. subtracting the cost of one good from the cost of another good. solving for the cost of one good in terms of another. comparing the cost of one good to the total cost. identifying the two products that can be produced.
solving for the cost of one good in terms of another
The opportunity cost of producing a good or a service can be found by: Multiple choice question. solving for the cost of one good in terms of another. subtracting the cost of one good from the cost of another good. comparing the cost of one good to the total cost. identifying the two products that can be produced.
solving for the cost of one good in terms of another.
For an entire economy, the production possibilities frontier is going to be bowed out because: Multiple choice question. some resources are better suited for producing some goods or services than others. higher production levels are always associated with higher costs. prices rise over time, so costs will increase. the cost of producing more of one good is the forgone production of another good.
some resources are better suited for producing some goods or services than others
In the real world, the opportunity cost increases as production increases, because: Multiple choice question. prices rise over time, so costs will increase. some resources are better suited for producing some goods or services than others. higher production levels are always associated with higher costs. the cost of producing more of one good is the forgone production of another good.
some resources are better suited for producing some goods or services than others.
When production is characterized by constant opportunity costs, the resulting production possibilities frontier will be a __ line. Multiple choice question. vertical horizontal curved straight
straight
Emmanuel enjoys growing zucchini in his garden and then selling his produce at the local farmers' market. The table below shows his marginal benefit and marginal cost for each hour he spends in his garden per week. The figure below plots the marginal benefit and marginal cost points. Emmanuel's Marginal Benefit and Marginal Cost of Gardening Hours Spent Gardening Marginal Benefit ($) Marginal Cost ($) 1 $21 $3 2 18 6 3 15 9 4 12 12 5 9 15 6 6 18 7 3 21 b. If Emmanuel were to spend 2 hours each week gardening: multiple choice 2 the marginal benefit would exceed the marginal cost by $12. the marginal benefit would equal the marginal cost. the marginal cost would exceed the marginal benefit by $12. the marginal benefit would exceed the marginal cost by $18.
the marginal benefit would exceed the marginal cost by $12. b. If Emmanuel were to spend 2 hours gardening, the MB of $18 would exceed the MC of $6 or the MB would exceed the MC by a total of $18 - $6 = $12.
Emmanuel enjoys growing zucchini in his garden and then selling his produce at the local farmers' market. The table below shows his marginal benefit and marginal cost for each hour he spends in his garden per week. The figure below plots the marginal benefit and marginal cost points. Emmanuel's Marginal Benefit and Marginal Cost of Gardening Hours Spent Gardening Marginal Benefit ($) Marginal Cost ($) 1 $21 $3 2 18 6 3 15 9 4 12 12 5 9 15 6 6 18 7 3 21 c. If Emmanuel were to spend 6 hours each week gardening: multiple choice 3 the marginal benefit would equal the marginal cost. the marginal cost would exceed the marginal benefit by $12. the marginal benefit would exceed the marginal cost by $18. the marginal benefit would exceed the marginal cost by $12.
the marginal cost would exceed the marginal benefit by $12. c. If Emmanuel were to spend 6 hours gardening, the MC of $18 would exceed the MB of $6 or the MC would exceed the MB by a total of $18 - $6 = $12.
The opportunity cost of an action is always equal to multiple choice · the time you give up to undertake the action. · the next-best alternative for the resources used to undertake the action. · the things you could have done instead of the action you chose to undertake. · the money you give up to undertake the action.
the next-best alternative for the resources used to undertake the action. Opportunity cost is the value of the next-best forgone alternative; the value of the opportunity that you gave up when you chose one activity, or opportunity, instead of another. It is not all of the forgone items but the value of the next-best alternative that is given up.
Opportunity cost is: Multiple choice question. the financial cost of purchasing a good or a service. the value of the opportunity that you give up when you choose one activity instead of another. the expected value of buying a good or a service. the marginal benefit minus the marginal cost.
the value of the opportunity that you give up when you choose one activity instead of another
Opportunity cost is: Multiple choice question. the marginal benefit minus the marginal cost. the financial cost of purchasing a good or a service. the expected value of buying a good or a service. the value of the opportunity that you give up when you choose one activity instead of another.
the value of the opportunity that you give up when you choose one activity instead of another.
Individuals and countries specialize because the opportunity cost of producing goods and services: Multiple choice question. varies. is in equilibrium. is constant. is low.
varies
The table below describes the total and marginal benefit Elvis gets from eating fried peanut butter and banana sandwiches. Elvis' Benefits of Fried Peanut Butter and Banana Sandwiches Fried PBB Sandwiches Total Benefit ($) Marginal Benefit ($) 1 42 42 2 66 24 3 75 4 81 5 78 -3 What is the marginal benefit of the 4th fried peanut butter and banana sandwich? multiple choice · $9 · $81 · $6 · $1
· $6 Marginal benefit (MB) is the additional benefit associated with one more unit of an activity. MB can be found by taking the change in total benefit divided by the change in quantity. To find the change in total benefit, take the new total benefit amount minus the previous total benefit. To find the change in quantity, take the new quantity minus the previous quantity. In this problem, from the table, we see that the total benefit of the third unit is $75 and the total benefit of the fourth unit is $81. So, when quantity increases by 1, going from 3 to 4, the total benefit increases from $75 to $81. Therefore, the MB is equal to the change in total benefit ($81 - $75) divided by the change in quantity (4 - 3) or MB = ($81 - $75)/(4 - 3) = $6/1 = $6.
