,Essentials of Economics, 8e (Hubbard)
Chapter 1 Economics: Foundations and Models
1.1 Three Key Economic Ideas
1) Apple assembles most iPhones in China and India because the lower wages earned by Chinese and
Indian workers and their experience in electronics manufacturing reduce the costs of assembling iPhones.
This is an example of Apple reacting to which of the three key economic ideas?
A) People are rational.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) Firms attempt to maximize revenues.
Answer: B
Diff: 2
Topic: Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
Special Feature: Chapter Opener: Should Apple Manufacture the iPhone in the United States?
2) In economics, choices must be made because we live in a world of
A) unemployment.
B) scarcity.
C) greed.
D) unlimited resources.
Answer: B
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
3) Which of the following statements about scarcity is true?
A) Scarcity refers to the situation in which unlimited wants exceed limited resources.
B) Scarcity is not a problem for the wealthy.
C) Scarcity is only a problem when a country has too large a population.
D) Scarcity only arises when there is a wide disparity in income distribution.
Answer: A
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
1
Copyright © 2025 Pearson Education, Inc.
,4) The basic economic problem of ________ has always existed and will continue to exist.
A) scarcity
B) efficiency
C) inflation
D) recession
Answer: A
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
5) By definition, economics is the study of
A) how to make money in the stock market.
B) how to make money in a market economy.
C) the choices people make to attain their goals, given their scarce resources.
D) supply and demand.
Answer: C
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
6) An economic ________ is a simplified version of some aspect of economic life used to analyze an
economic issue.
A) market
B) trade-off
C) variable
D) model
Answer: D
Diff: 1
Topic: Economic Models
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
2
Copyright © 2025 Pearson Education, Inc.
,7) Where do economic agents such as individuals, firms, and nations interact with each other?
A) in public locations monitored by the government
B) in any arena that brings together buyers and sellers
C) in any physical location where people can physically get together for selling goods, such as shopping
malls
D) in any location where transactions can be monitored by consumer groups and taxed by the
government
Answer: B
Diff: 1
Topic: Markets
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
8) In economics, the term ________ refers to a group of buyers and sellers of a product and the
arrangement by which they come together to trade.
A) collective
B) cooperative
C) market
D) trade-off
Answer: C
Diff: 1
Topic: Markets
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
9) Economists assume that individuals
A) behave in unpredictable ways.
B) will never take actions to help others.
C) prefer to live in a society that values fairness above all else.
D) are rational and respond to incentives.
Answer: D
Diff: 1
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
3
Copyright © 2025 Pearson Education, Inc.
,10) Economists assume that rational behavior is useful in explaining choices people make
A) because irrational people do not make economic choices.
B) even though people may not behave rationally all the time.
C) because individuals act rationally all the time in all circumstances.
D) even though people rarely, if ever, behave in a rational manner.
Answer: B
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
11) Economists assume that rational people do all of the following except
A) use all available information as they act to achieve their goals.
B) undertake activities that benefit others and hurt themselves.
C) weigh the benefits and costs of all possible alternative actions.
D) respond to economic incentives.
Answer: B
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
12) Economics does not study correct or incorrect behaviors but rather it assumes that economic agents
behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.
A) equitably
B) rationally
C) emotionally
D) selfishly
Answer: B
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
4
Copyright © 2025 Pearson Education, Inc.
,13) Consider the following statements:
a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other
rival gas stations in the area.
b. Banks do not take steps to increase security since they believe it is less costly to allow some bank
robberies than to install expensive security monitoring equipment.
c. Firms produce more of a particular energy drink when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only
B) b only
C) c only
D) a, b, and c
Answer: D
Diff: 3
Topic: People Respond to Economic Incentives
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
14) Suppose that some teachers have decided that economic and financial uncertainty have made the
prospect of retiring more risky, and therefore carry a higher cost than not retiring. By using all available
information as they act to achieve their goals, these teachers are exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: A
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
5
Copyright © 2025 Pearson Education, Inc.
,15) Suppose that some investors have decided that economic and financial uncertainty have made the
prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and
therefore choose to invest in foreign markets. By using all available information as they act to achieve
their goals, these investors are exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: A
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
16) Suppose the U.S. government encouraged new medical school graduates to take over existing
practices from doctors wishing to retire by paying both the new and retiring doctors $100,000. These
doctors would be exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: B
Diff: 2
Topic: People Respond to Economic Incentives
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
17) Suppose the U.S. government encouraged consumers to trade in their old automobiles for more
efficient, new electric models by paying up to $5,000 for the old automobiles. These consumers who did
trade in their old automobiles to take advantage of the government offer would be exemplifying the
economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: B
Diff: 2
Topic: People Respond to Economic Incentives
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
6
Copyright © 2025 Pearson Education, Inc.
,18) The Pharmaceuticals and Research Manufacturers of America requested changes including 25 percent
tax credits for pharmaceutical companies to build and expand manufacturing facilities, asserting the
changes would promote domestic expansion and prevent product shortages. Pharmaceutical
manufacturers using all available information, including whether to respond to tax-credit incentives to
expand production, exemplifies which key economic idea?
A) People are rational.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) The market system relies on the principle of voluntary exchange.
Answer: A
Diff: 1
Topic: People Are Rational
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
Special Feature: An Inside Look: Will Bidenʹs Strategy Expand the U.S. Biotechnology Industry?
19) Leaders in the U.S. pharmaceutical industry have asked the Biden administration for tax breaks and
subsidies for U.S. drug manufacturers to assist in domestic expansion and to help compete with foreign
producers. Offering tax breaks and subsidies reflects an attempt to get firms to follow which key
economic idea?
A) People are rational.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) The market system relies on the principle of voluntary exchange.
Answer: B
Diff: 1
Topic: People Respond to Economic Incentives
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
Special Feature: An Inside Look: Will Bidenʹs Strategy Expand the U.S. Biotechnology Industry?
7
Copyright © 2025 Pearson Education, Inc.
,20) If the Biden administration is successful in implementing changes to the student loan program where
students could expect to pay back only half of what they borrowed, and this resulted in students actually
borrowing more money than initially planned, the students would be following which key economic
idea?
A) People are allocatively efficient.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) The market system relies on the principle of voluntary exchange.
Answer: B
Diff: 2
Topic: People Respond to Economic Incentives
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
Special Feature: Apply the Concept: Will Changes to the Federal Student Loan Program Unintentionally
Give Colleges an Incentive to Increase Tuition?
21) The total value of outstanding student loans in the United States in 2023 was about
A) $37 billion.
B) $52 billion.
C) $825 billion.
D) $1.5 trillion.
Answer: D
Diff: 1
Topic: People Respond to Economic Incentives
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
Special Feature: Apply the Concept: Will Changes to the Federal Student Loan Program Unintentionally
Give Colleges an Incentive to Increase Tuition?
22) In economics, the term ________ means ʺadditionalʺ or ʺextra.ʺ
A) allocative
B) marginal
C) equity
D) optimal
Answer: B
Diff: 1
Topic: Optimal Decisions Are Made at the Margin
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
8
Copyright © 2025 Pearson Education, Inc.
, 23) A grocery store sells a bag of potatoes at a fixed price of $3.75. Which of the following is a term used
by economists to describe the money received from the sale of an additional bag of potatoes?
A) marginal revenue
B) gross earnings
C) pure profit
D) marginal costs
Answer: A
Diff: 1
Topic: Optimal Decisions Are Made at the Margin
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
24) Economists reason that the optimal decision is to continue any activity up to the point where the
A) marginal benefit is zero.
B) marginal benefit is greater than the marginal cost.
C) marginal cost is zero.
D) marginal benefit equals the marginal cost.
Answer: D
Diff: 2
Topic: Optimal Decisions Are Made at the Margin
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
25) Marginal analysis involves undertaking an activity
A) until its marginal costs start declining.
B) only when its marginal benefits are positive.
C) until its marginal benefits equal marginal costs.
D) only if its marginal costs are greater than its marginal benefits.
Answer: C
Diff: 1
Topic: Optimal Decisions Are Made at the Margin
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
9
Copyright © 2025 Pearson Education, Inc.
Chapter 1 Economics: Foundations and Models
1.1 Three Key Economic Ideas
1) Apple assembles most iPhones in China and India because the lower wages earned by Chinese and
Indian workers and their experience in electronics manufacturing reduce the costs of assembling iPhones.
This is an example of Apple reacting to which of the three key economic ideas?
A) People are rational.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) Firms attempt to maximize revenues.
Answer: B
Diff: 2
Topic: Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
Special Feature: Chapter Opener: Should Apple Manufacture the iPhone in the United States?
2) In economics, choices must be made because we live in a world of
A) unemployment.
B) scarcity.
C) greed.
D) unlimited resources.
Answer: B
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
3) Which of the following statements about scarcity is true?
A) Scarcity refers to the situation in which unlimited wants exceed limited resources.
B) Scarcity is not a problem for the wealthy.
C) Scarcity is only a problem when a country has too large a population.
D) Scarcity only arises when there is a wide disparity in income distribution.
Answer: A
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
1
Copyright © 2025 Pearson Education, Inc.
,4) The basic economic problem of ________ has always existed and will continue to exist.
A) scarcity
B) efficiency
C) inflation
D) recession
Answer: A
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
5) By definition, economics is the study of
A) how to make money in the stock market.
B) how to make money in a market economy.
C) the choices people make to attain their goals, given their scarce resources.
D) supply and demand.
Answer: C
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
6) An economic ________ is a simplified version of some aspect of economic life used to analyze an
economic issue.
A) market
B) trade-off
C) variable
D) model
Answer: D
Diff: 1
Topic: Economic Models
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
2
Copyright © 2025 Pearson Education, Inc.
,7) Where do economic agents such as individuals, firms, and nations interact with each other?
A) in public locations monitored by the government
B) in any arena that brings together buyers and sellers
C) in any physical location where people can physically get together for selling goods, such as shopping
malls
D) in any location where transactions can be monitored by consumer groups and taxed by the
government
Answer: B
Diff: 1
Topic: Markets
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
8) In economics, the term ________ refers to a group of buyers and sellers of a product and the
arrangement by which they come together to trade.
A) collective
B) cooperative
C) market
D) trade-off
Answer: C
Diff: 1
Topic: Markets
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
9) Economists assume that individuals
A) behave in unpredictable ways.
B) will never take actions to help others.
C) prefer to live in a society that values fairness above all else.
D) are rational and respond to incentives.
Answer: D
Diff: 1
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
3
Copyright © 2025 Pearson Education, Inc.
,10) Economists assume that rational behavior is useful in explaining choices people make
A) because irrational people do not make economic choices.
B) even though people may not behave rationally all the time.
C) because individuals act rationally all the time in all circumstances.
D) even though people rarely, if ever, behave in a rational manner.
Answer: B
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
11) Economists assume that rational people do all of the following except
A) use all available information as they act to achieve their goals.
B) undertake activities that benefit others and hurt themselves.
C) weigh the benefits and costs of all possible alternative actions.
D) respond to economic incentives.
Answer: B
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
12) Economics does not study correct or incorrect behaviors but rather it assumes that economic agents
behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.
A) equitably
B) rationally
C) emotionally
D) selfishly
Answer: B
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
4
Copyright © 2025 Pearson Education, Inc.
,13) Consider the following statements:
a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other
rival gas stations in the area.
b. Banks do not take steps to increase security since they believe it is less costly to allow some bank
robberies than to install expensive security monitoring equipment.
c. Firms produce more of a particular energy drink when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only
B) b only
C) c only
D) a, b, and c
Answer: D
Diff: 3
Topic: People Respond to Economic Incentives
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
14) Suppose that some teachers have decided that economic and financial uncertainty have made the
prospect of retiring more risky, and therefore carry a higher cost than not retiring. By using all available
information as they act to achieve their goals, these teachers are exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: A
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
5
Copyright © 2025 Pearson Education, Inc.
,15) Suppose that some investors have decided that economic and financial uncertainty have made the
prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and
therefore choose to invest in foreign markets. By using all available information as they act to achieve
their goals, these investors are exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: A
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
16) Suppose the U.S. government encouraged new medical school graduates to take over existing
practices from doctors wishing to retire by paying both the new and retiring doctors $100,000. These
doctors would be exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: B
Diff: 2
Topic: People Respond to Economic Incentives
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
17) Suppose the U.S. government encouraged consumers to trade in their old automobiles for more
efficient, new electric models by paying up to $5,000 for the old automobiles. These consumers who did
trade in their old automobiles to take advantage of the government offer would be exemplifying the
economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: B
Diff: 2
Topic: People Respond to Economic Incentives
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
6
Copyright © 2025 Pearson Education, Inc.
,18) The Pharmaceuticals and Research Manufacturers of America requested changes including 25 percent
tax credits for pharmaceutical companies to build and expand manufacturing facilities, asserting the
changes would promote domestic expansion and prevent product shortages. Pharmaceutical
manufacturers using all available information, including whether to respond to tax-credit incentives to
expand production, exemplifies which key economic idea?
A) People are rational.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) The market system relies on the principle of voluntary exchange.
Answer: A
Diff: 1
Topic: People Are Rational
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
Special Feature: An Inside Look: Will Bidenʹs Strategy Expand the U.S. Biotechnology Industry?
19) Leaders in the U.S. pharmaceutical industry have asked the Biden administration for tax breaks and
subsidies for U.S. drug manufacturers to assist in domestic expansion and to help compete with foreign
producers. Offering tax breaks and subsidies reflects an attempt to get firms to follow which key
economic idea?
A) People are rational.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) The market system relies on the principle of voluntary exchange.
Answer: B
Diff: 1
Topic: People Respond to Economic Incentives
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
Special Feature: An Inside Look: Will Bidenʹs Strategy Expand the U.S. Biotechnology Industry?
7
Copyright © 2025 Pearson Education, Inc.
,20) If the Biden administration is successful in implementing changes to the student loan program where
students could expect to pay back only half of what they borrowed, and this resulted in students actually
borrowing more money than initially planned, the students would be following which key economic
idea?
A) People are allocatively efficient.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) The market system relies on the principle of voluntary exchange.
Answer: B
Diff: 2
Topic: People Respond to Economic Incentives
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
Special Feature: Apply the Concept: Will Changes to the Federal Student Loan Program Unintentionally
Give Colleges an Incentive to Increase Tuition?
21) The total value of outstanding student loans in the United States in 2023 was about
A) $37 billion.
B) $52 billion.
C) $825 billion.
D) $1.5 trillion.
Answer: D
Diff: 1
Topic: People Respond to Economic Incentives
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
Special Feature: Apply the Concept: Will Changes to the Federal Student Loan Program Unintentionally
Give Colleges an Incentive to Increase Tuition?
22) In economics, the term ________ means ʺadditionalʺ or ʺextra.ʺ
A) allocative
B) marginal
C) equity
D) optimal
Answer: B
Diff: 1
Topic: Optimal Decisions Are Made at the Margin
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
8
Copyright © 2025 Pearson Education, Inc.
, 23) A grocery store sells a bag of potatoes at a fixed price of $3.75. Which of the following is a term used
by economists to describe the money received from the sale of an additional bag of potatoes?
A) marginal revenue
B) gross earnings
C) pure profit
D) marginal costs
Answer: A
Diff: 1
Topic: Optimal Decisions Are Made at the Margin
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
24) Economists reason that the optimal decision is to continue any activity up to the point where the
A) marginal benefit is zero.
B) marginal benefit is greater than the marginal cost.
C) marginal cost is zero.
D) marginal benefit equals the marginal cost.
Answer: D
Diff: 2
Topic: Optimal Decisions Are Made at the Margin
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
25) Marginal analysis involves undertaking an activity
A) until its marginal costs start declining.
B) only when its marginal benefits are positive.
C) until its marginal benefits equal marginal costs.
D) only if its marginal costs are greater than its marginal benefits.
Answer: C
Diff: 1
Topic: Optimal Decisions Are Made at the Margin
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an
economist
AACSB: Analytical thinking
9
Copyright © 2025 Pearson Education, Inc.
