A rational consumer maximizes her
a. preferences.
b. marginal rate of substitution.
c. utility.
d. budget constraint.
c
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A recent study found that it was cheaper to buy a chicken dinner from Kentucky Fried Chicken than it was to prepare it at home. The researcher included all costs including the imputed value of time involved to prepare the meal at home. This study illustrates the
A. value of marginal analysis. B. law of increasing costs. C. difference between real costs and money costs. D. cost disease of the service sector.
What could cause a decrease in the price level and simultaneously an increase in GDP similar to the 1920s in the United States?
A) a decrease in interest rates B) an increase in interest rates C) a decrease in consumer confidence D) an increase in productivity
Water has a higher total utility (usefulness) than diamonds, but it is much less expensive than diamonds. This is because whereas diamonds are rare, water is plentiful, making the marginal utility of diamonds much higher than the marginal utility of water. What are two other goods that you can think that demonstrate that price is determined not by total utility but by marginal utility? Explain how these goods demonstrate the same principles.
What will be an ideal response?
All other factors held constant, when McDonald's raises the price of its Quarter Pounder by 50 cents,
A) there is likely to be a decrease in the quantity of Taco Bell's Chalupas demanded, assuming the Quarter Pounder and Chalupas are substitutes. B) there is likely to be an increase in demand for Taco Bell's Chalupas, assuming the Quarter Pounder and Chalupas are substitutes. C) there is likely to be a decrease in demand for Taco Bell's Chalupas, assuming the Quarter Pounder and Chalupas are substitutes. D) there is likely to be an increase in demand for McDonald's Quarter Pounder, assuming the Quarter Pounder and Chalupas are substitutes.