The MC = MR approach to profit maximization means that a firm should produce until
a. marginal revenue equals zero
b. additional profit equals zero
c. marginal cost becomes negative
d. marginal revenue equals price
e. price equals average total cost
B
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Refer to Figure f. A benefit function, W(F), is plotted in Figure f. The letter A represents:
A. the risk premium of the consumption bundle.
B. the expected utility of the consumption bundle.
C. the certainty equivalent of the consumption bundle.
D. the expected consumption.
In a free market economy, the decisions of buyers and sellers are:
A. coordinated by the government. B. guided by prices. C. motivated by custom and tradition. D. random.
The alternative combinations of two goods that a consumer can purchase with a specific money income is shown by:
A. a production possibilities curve. B. a demand curve. C. a consumer expenditure line. D. a budget line.
Refer to the above figure. All of the following are true concerning the diamond-water paradox EXCEPT
A. marginal utility of diamond consumption is relatively high. B. since the price of diamonds is high, demand is great. C. the demand for water exceeds the demand for diamonds. D. the price of diamonds exceeds the price of water.