Question

1. Making a decision on the margin means

Select one:

a. variable costs to fixed costs

b. comparing total cost to total benefits

c. sunk costs to total cost

d. marginal revenue to marginal costs

e. additional benefits to additional costs

2. Collusion is when businesses:

Select one:

a. have non-cooperative outcomes, because they compete outside the public eye

b. agree to cooperate, and their behavior does not serve public interest

c. agree to cooperate, and the U.S. government works hard to encourage this behavior

d. act in their own self-interest and ignore what the other businesses are doing

3. The circular flow diagram illustrates the following:

Select one:

a. None of the above

b. households buy products and resources

c. households sell products and resources

d. households sell products and buy resources

e. households buy products and sell ressources

Answer 1

1. Option E.

• When a person is said to be taking decisions on a margin it means that he is considered the very next choice or an additional action.
• That means he is considering the marginal costs and benefits of any action by evaluating its additional benefits to additional costs.

2. Option B.

• Collusion is a illegal pricing strategy adopted by most of the firm's within an oligopoly Market.
• Under this strategy the firms will illegally set very high prices and sell low output quantities.
• Hence collusion is said to occur when the businesses agree to co-operate and their behaviour does not serve public interest.

3. Option E.

• The circular flow diagram of an economy is a diagram which show how various transactions occur between firm's and households.
• It shows how resources and products are exchanged between firms and households in the exchange of money.
• This diagram illustrates that households buy products from firms and sell resources to them.