While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00, Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75. She thinks to herself, "Is it worth the extra 25 cents to get the medium fries?" To an economist, Sally's decision is an example of
A) marginal decision making.
B) basing decisions on total, rather than marginal, value.
C) an unintended consequence.
D) the fallacy of composition.

Question

Quizplus · Accepted Answer

Marginal decision making is the process of making decisions based on the additional costs and benefits of a particular action. In this case, Sally is considering whether or not to purchase the value meal, which includes the cheeseburger, medium drink, and medium fries, for $2.75. The marginal cost of purchasing the value meal is $0.25, as this is the difference between the price of the value meal and the price of the cheeseburger and medium drink purchased separately. The marginal benefit of purchasing the value meal is the medium fries, which Sally values at $0.25. Therefore, Sally's decision to purchase the value meal is an example of marginal decision making.

While Waiting in Line to Buy One Cheeseburger for $1