Total utility is maximized in the consumption of two goods by
A) equating the marginal utility for each good consumed.
B) equating the marginal utility per dollar spent for each good consumed.
C) equating the total utility of each good divided by its price.
D) maximizing expenditure on each good.
Answer: B
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Marginal utility measures the
A) total utility from consumption. B) additional utility from an additional unit of consumption. C) average utility from an additional unit of consumption. D) additional cost of an additional unit of consumption.
The World Bank has extended loans to the government of a developing country to finance construction of a canal with a certain future flow of earmings Now, however, the government has decided to redirect those funds to build a casino that may or may not generate suficient profits to allow the government to repay the loan This situation is an example of
a. Systemic Risk b. Moral Hazard c. Adverse Selection d. Asymmetric Information e. Principle Agent Problem
The price elasticity of demand for a rental home in Luxury Resorts in the summer is 1.25 and is 2.25 in the spring. If Luxury Resorts faces a constant marginal cost of $500 per home rental, what is the profit-maximizing off-peak load price to charge in the spring?
A) $1,250 B) $500 C) $2,500 D) $900
Which of the following statements is true about investments in general and specific human capital?
a. Firms invest in development of general human capital of their employees. b. Employees invest in gaining specific human capital. c. Investment in general human capital of its employees by a firm may turn into a sunk cost if the employee leaves the organization to join another after completing the relevant training. d. When a firm invests in specific human capital of its employees, the employees become more attractive to other firms whose workplaces are operated and staffed differently.