Suppose Jenny's marginal utility of fish is 40 and her marginal utility from chips is 20. The price of fish is $10 and the price of chips is $1. What should Jenny do to maximize her utility? Explain your answer
What will be an ideal response?
Jenny should buy more chips and fewer fish. Her marginal utility per dollar from chips is 20 and her marginal utility per dollar from fish is 4. If Jenny decreases her purchases of fish by $1, she loses 4 units of utility. But if she spends the dollar on chips, she gains 20 units of utility. Because her gain in utility exceeds her loss, Jenny's total utility increases as she buys more chips and fewer fish.
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If a perfectly competitive wheat farmer is maximizing its profit and then increases its output, the farmer's
A) total revenue increases, but total cost rises by more so that the farmer's total profit decreases. B) total revenue decreases and total cost increases, both thereby decreasing the farmer's total profit. C) total revenue does not change but total cost increases, thereby decreasing the farmer's total profit. D) marginal revenue increases, but so does marginal cost, so that the farmer's total profit increases. E) total revenue and total cost both rise, but the effect on the farmer's total profit is uncertain.
A monopolistic competitor will maximize its profits at the output level at which
A) TC = TR. B) MC = MR. C) the MC curve intersects the demand curve. D) MR = ATC.
A firm experiencing constant economies of scale will have a long-run average cost curve that is:
a. upward sloping b. vertical c. downward sloping d. horizontal
Voluntarism includes methods for dealing with pollution that
a. carry no legal authority. b. call the problems of pollution to the public's attention. c. involve trying to persuade polluters to reduce or eliminate pollution voluntarily. d. include all of the above.