A consumer allocates his budget according to rules of utility maximization
What are the rules of utility maximization and how do they explain the paradox of value, which is that diamonds are expensive but useless, while water is inexpensive but essential?
The rules of utility maximization are to allocate the entire available budget and consume the combination of goods and services that make the marginal utility per dollar equal for all goods and services. Equating the marginal utility per dollar is what explains the paradox of value. People consume a great deal of water. Because they consume a lot of water, the marginal utility of water is quite low. However, people have only a few diamonds. Hence the marginal utility of a diamond is quite high. Thus for the marginal utility per dollar of water to equal that of diamonds requires that the price of water be low and the price of diamonds high. Note, however, that this condition says nothing about the total utility from water or the total utility from diamonds. Because water is essential to life, its total utility is tremendous. Because diamonds are not essential, their total utility is much smaller.
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A) 59 percent. B) 80 percent. C) 70 percent. D) 40 percent.
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a. the responsibility for collecting the tax. b. who actually bears the tax burden. c. who the tax is initially levied on. d. the regressive rate structure of the tax.
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a. guarantee the federal budget will be balanced in a relatively short amount of time. b. institute countercyclical fiscal policy without the delays associated with legislative action. c. automatically produce surpluses during recessions and deficits during expansions. d. require discretionary actions on the part of Congress before they exert an impact on output and employment.
What is the total benefit associated with producing four units of the control variable, Q (identify point A in the table)?Control variableTotal BenefitsTotal CostsNet BenefitsMarginal BenefitMarginal CostMarginal Net BenefitQB(Q)C(Q)N(Q)MB(Q)MC(Q)MNB(Q)0000---190010080090010080021,700300C80020060032,4006001,800700E4004A1,0002,00060040020053,5001,5002,000500500F63,9002,1001,800D600-20074,2002,8001,400300700-40084,400B800200800-60094,5004,5000100900-800104,5005,500-1,00001,000-1,000
A. 600 B. 2,600 C. 3,400 D. 3,000