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Suppose that Merle is buying bananas
Suppose that Merle is buying bananas. She decides that she would like to purchase three bananas at the price of $0.25/banana but not a fourth banana. Which of the five foundations of economics best describes Merle's thinking?
a. opportunity cost
b. incentives
c. trade creates value
d. marginal thinking
Expert Solution
The correct answer to the given question is option d. marginal thinking.
The marginal analysis or thinking is used by a firm or an individual to decide whether an incremental unit or additional unit of a product should be produced or consumed. The additional unit is only produced or consumed when the marginal benefit is greater than the marginal cost.
The opportunity cost for a selected alternative is defined as the net gain associated with the second best alternative, which is forsaken for choosing the best alternative.
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