For a consumer, the marginal utility of good A is 25 and its price is $5. The marginal utility of good B is 60 and its price is $12. The consumer has allocated his entire budget. Is this consumer maximizing his total utility? Explain your answer
What will be an ideal response?
Yes, the consumer is maximizing his utility. He has allocated his entire budget and he is consuming the combination of goods A and B such that the marginal utility per dollar from each is the same.
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Which of the following is an example of a temporary price differential in a resource market?
a. land downtown is more expensive than land in the suburbs b. a superstar professional basketball player is paid more than the average professional player c. cable television installers have a higher wage than telephone installers d. an airline pilot is paid more than a flight attendant e. a worker in a toxic waste plant earns more than a teacher
In which of the following situations will the price of medical care decrease with an increase in its demand?
a. When the supply of medical care is the same as the demand for medical care b. When there is an increase in productivity as a result of a technological advancement c. When there is an increase in the price of resources used to produce medical care d. When the supply of medical care increases more than the demand for medical care e. When there is an increase in future profit expectations
If the United Auto Workers union can obtain a substantial wage increase for auto workers, there will be
a. a decrease in the supply of automobiles, which is a shift to the right of the supply curve. b. a decrease in the supply of automobiles, which is a shift to the left of the supply curve. c. an increase in the supply of automobiles, which is a shift to the right of the supply curve. d. an increase in the supply of automobiles, which is a shift to the left of the supply curve.
What is productive efficiency?
A) a situation in which resources are allocated to their highest profit use B) a situation in which resources are allocated such that goods can be produced at their lowest possible average cost C) a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it D) a situation in which firms produce as much as possible