Answered: Lucia is waiting in line to receive a…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 1PA

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Question

Lucia is waiting in line to receive a free t-shirt at a charity event. Because the shirts are free, there are many people in line, and a long wait time is expected.

Consider the following sentence: By waiting in line for the shirt Lucia will miss an appointment to tutor an economics student, for which she would have been paid $30.

Which basic concept of individual choice does this sentence best illustrate?

A. Externalities are a shortcoming of the market.

B. Many decisions are made on the margin.

C. People usually exploit opportunities to make themselves better off.

D. Opportunity costs and money costs (price) are related but are not always exactly the same.

Expert Solution

Step 1

Choices Are Made at the Margin. Economists argue that most choices are made “at the margin.” The margin is the current level of an activity. Think of it as the edge from which a choice is to be made. A choice at the margin is a decision to do a little more or a little less of something.

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