Lisa Beth loves bananas and derives 10 utils of total utility eating the first one. When she consumes a second banana, her total utility increases to 15 utils. Eating the third raises her total utility to 18 utils. Economists reading her likes and dislikes conclude that
a. because the total utility of the first is 10, she is better off consuming that one and no more
b. because the marginal utility of the third banana is 18/3 = 6 utils, she would be better off adding that third to consumption because 6 utils is still better than zero
c. the marginal utility of the second banana is 8 utils, which means she should not eat it
d. the marginal utility of the first banana is zero, even though total utility is 10 utils because at zero bananas, total utility is zero
e. the marginal utility of the third banana is 3 utils, which conforms to the law of diminishing marginal utility
E
You might also like to view...
Every spring, motorists do more driving than during the winter months. Every spring, the price of gasoline increases and the motorists buy more gasoline. This experience suggests that the
A) "law of supply" does not always hold for necessities like gasoline. B) "law of demand" does not always hold for necessities like gasoline. C) laws of supply and demand are both contradicted for gasoline, though only during the spring driving season. D) None of the above answers are correct.
Everything else remaining unchanged, if a new seller enters a market to compete with an existing monopoly that is enjoying economies of scale, it will lead to:
A) higher profits for both firms. B) higher profits for the existing firm. C) lower profits for the existing firm. D) higher market power for the existing firm.
The law of diminishing marginal utility applies to goods with negative income elasticities; it does not always apply for goods with positive income elasticities
a. True b. False
Exhibit 10-7 Aggregate supply and demand curves
In Exhibit 10-7, the aggregate demand and supply curves reflect an economy in which:
A. full employment is at $1,000 billion GDP. B. excess aggregate supply is created when there is a shift from AD1 to AD2. C. excess aggregate demand forces prices up to P = 120. D. excess aggregate demand causes prices to stabilize at P = 110.