Ralph Wants to Buy Some Milk and a Box of Cereal

question 88

Multiple Choice

Ralph wants to buy some milk and a box of cereal. If Ralph buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Ralph, the marginal cost of the third quart of milk is

• A) zero.
• B) 25 cents.
• C) 75 cents.
• D) $1.

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Definitions:

International Trade

The exchange of goods, services, and capital between countries and territories, influenced by comparative advantages and economies of scale.

Infant-Industry Argument

The economic rationale for protecting new industries with tariffs or other trade barriers until they become competitive internationally.

Tariff

A tax or duty to be paid on a particular class of imports or exports, used by governments to control trade and protect domestic industries.