Related to the Economics in Practice on p. 318. Producers of Honest Tea add less sugar to their tea than the amount that would maximize consumer's total utility from sugar because
A. the marginal utility to the consumer from adding more sugar is very low (near zero) while the marginal health cost (added calories) is quite high.
B. the financial cost of the additional sugar is less than the additional revenue that the firm would earn.
C. producers are attempting to differentiate their product from the very sweet Snapple.
D. producers are attempting to market their product to diabetics.
Answer: A
You might also like to view...
Upon learning that his auto transmission is about to fail, Ray Roma sells his car to an unsuspecting buyer. This circumstance illustrates the:
A. adverse selection problem. B. free-rider problem. C. moral hazard problem. D. principal-agent problem.
The Federal Reserve System acts as the government's fiscal agent by
A. determining how to finance a deficit. B. preparing the budget the President presents to Congress every year. C. providing checking account services for the government. D. auditing taxpayers.
Suppose that the government enacts a tax on Good X. In order to estimate the effect of the tax on the quantity demanded of a related good, Good Y, we can use the concept of the:
A) price elasticity of demand. B) income elasticity of demand. C) cross-price elasticity of demand. D) cost elasticity of demand.
The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities from a bond dealer by transmitting the funds to the dealer?s deposit account at Bank ABC, then
A) Bank ABC can make no additional loans. B) Bank ABC can make additional loans up to $800,000. C) Bank ABC can make additional loans up to $1 million. D) Bank ABC cannot make any additional loans, but the system as a whole can make additional loans up to $1 million.