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Question
Microeconomics
Posted 7 months ago

Which of the following does NOT describe decision-making based on marginal analysis?

Choose 1 answer:
(A) An individual comparing the marginal utility of another cup of coffee against the cost of another cup of coffee
(B) A producer comparing the marginal revenue of hiring another worker against the marginal cost of hiring another worker
(C) A producer comparing the benefit of buying another piece of equipment against the cost of another piece of equipment
(D) An individual comparing the average utility they receive from all units of consumption against the average cost of all units of consumption.
(E) An individual comparing the additional happiness they get from another cookie against the cost of consuming an additional cookie
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Answer from Sia
Posted 7 months ago
Solution
a
Marginal Analysis: Marginal analysis involves comparing the additional benefits and additional costs of a decision
b
Option (A): An individual comparing the marginal utility of another cup of coffee against the cost of another cup of coffee is an example of marginal analysis
c
Option (B): A producer comparing the marginal revenue of hiring another worker against the marginal cost of hiring another worker is also an example of marginal analysis
d
Option (C): A producer comparing the benefit of buying another piece of equipment against the cost of another piece of equipment is another example of marginal analysis
e
Option (D): An individual comparing the average utility they receive from all units of consumption against the average cost of all units of consumption does not involve marginal analysis, as it focuses on average rather than marginal values
f
Option (E): An individual comparing the additional happiness they get from another cookie against the cost of consuming an additional cookie is an example of marginal analysis
Answer
(D) An individual comparing the average utility they receive from all units of consumption against the average cost of all units of consumption.
Key Concept
Marginal Analysis
Explanation
Marginal analysis involves comparing the additional (marginal) benefits and costs of a decision, not the average values. Option (D) focuses on average utility and cost, which is not marginal analysis.

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