The law of diminishing marginal benefit explains why
A. addicts can never get enough.
B. people will only consume their favorite goods and not try new things.
C. demand curves slope downward.
D. supply curves slope upward.
Answer: C
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In the United States, the size of the underground economy is estimated to be as much as $2 trillion
Indicate whether the statement is true or false
Using Figure 6-2, calculate the price elasticity of demand (dropping all minus signs) between P = 10 and P = 12.
A. 2.20 B. 0.45 C. 0.80 D. 1.25
The principal distinction between positive analysis and normative analysis is that
A) positive analysis is useful and normative analysis is not useful. B) positive analysis is optimistic and normative analysis is neutral. C) economists always agree on the conclusions of positive analysis but could disagree on the conclusions of normative analysis. D) positive analysis tells us "what is," but normative analysis tells us "what ought to be."
Why is adverse selection more likely in financial markets when interest rates rise?
A) The remaining borrowers are more likely to be risky. B) Higher interest rates are likely to hurt the economy. C) If firms have to pay higher interest rates, they may choose to use the funds differently than they first intended. D) Banks eliminate risky borrowers by raising interest rates.