Carolyn spends her income on popular magazines and music CDs. If the price of a CD is four times the price of a magazine and if Carolyn is maximizing her utility, she buys
A) both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.
B) both goods until the marginal utility of the last magazine purchased is four times the marginal utility of the last CD purchased.
C) four times as many magazines as CDs.
D) four times as many CDs as magazines.
Answer: A
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When economists assume that people are rational, they are assuming that people generally agree what is good for human beings.
Answer the following statement true (T) or false (F)
The consumption function becomes steeper as the income tax rate decreases because a decrease in the income tax rate: a. increases the disposable income available to the consumer. b. decreases the disposable income available to the consumer. c. increases the marginal propensity to save
d. increases the wealth of the consumer.
The rate of return that owners of capital must receive in order to induce them to continue supplying the capital is often referred to as
a. accounting profit. b. the normal or market rate of return. c. economic profit. d. the accounting rate of return.
Citizens of Tinytown are considering building a new park. If each voter in Tinytown has a reservation price that is less than the total cost of the park, then:
A. some sort of collective action by voters will be necessary to fund the park. B. a private firm will have an incentive to build the park. C. the park will never be built. D. the benefit of the park is less than the cost of the park, so the park should not be built.