Rational Behavior Requires Thinking at the Margin

question 294

Multiple Choice

Rational behavior requires thinking at the margin. Which example represents this type of thinking?

• A) deciding whether a second burger is worth the extra $2
• B) deciding whether the overtime pay is worth working on your day off
• C) deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery
• D) All of these examples represent thinking at the margin.

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Definitions:

Cash Over And Short

An account that records the discrepancies between the actual cash received and the expected amount.

Credit Balance

An accounting term that signifies a positive balance in a liability, revenue, or equity account, which increases on the credit side and decreases on the debit side.

Petty Cash Fund

A nominal sum of cash reserved for quick payments of assorted trivial expenses.

Replenishing

Refers to the process of adding stock or supplies to bring quantities back up to predetermined levels.