The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that:
A. gasoline is an economic good but water is not.
B. the marginal utility of gasoline is greater than the marginal utility of a gallon of water.
C. the average utility of a gallon of gasoline is greater than the average utility of a gallon of water.
D. the total utility of gasoline exceeds the total utility of water.
Answer: B
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The AD curve slopes
A) downward due to the wealth and price effects. B) downward due to the wealth and substitution effects. C) upward due to the price and substitution effects. D) upward due to the wealth and substitution effects.
Increase in price of a good will increase consumers' demand. This is a(n)
A) positive statement. B) true statement. C) inverse statement. D) normative statement.
The monopolist determines the price and quantity combination that maximizes short-run profits by
A) finding the quantity at which marginal cost and marginal revenue are equal and then using the demand curve to find price. B) determining the price by finding the highest price at which sales can be made and then using the demand curve to find the appropriate quantity. C) finding the point at which marginal revenue and demand intersect. This gives the price and quantity that maximizes profits. D) finding the quantity at which average revenue and average total cost are furthest apart.
Suppose there is an increase in profitability. This suggests that
A) firms have increased their expectations of future profits. B) the real interest rate has increased. C) the rate of depreciation has increased. D) all of the above