Making Rational Decisions at the Margin Means That People

question 102

Multiple Choice

Making rational decisions at the margin means that people

• A)make those decisions that do not impose a marginal cost.
• B)evaluate how easily a decision can be reversed if problems arise.
• C)compare the marginal costs and marginal benefits of each decision.
• D)always calculate the dollar costs for each decision.

---

Definitions:

Contribution Margin

The amount by which a product's sales price exceeds its variable costs, contributing to covering fixed costs and generating profit.

Fixed Costs

Expenses that do not change in total despite fluctuations in the level of output or sales volume, such as rent or salaries.

Operating Income

The profit realized from a business's core operations, excluding income from investments and the effects of taxes and interest.

Variable Costs

Costs that vary in direct proportion to the level of production or sales volume, like raw materials and direct labor.