Two college students, Mary and Maggie, are spending spring break in Florida. Mary buys a cup of coffee each morning at the local Starbucks rather than from one of the local coffee shops. Maggie claims that Mary is irrational because she never purchases Starbucks coffee at home, and Starbucks coffee costs more than the coffee sold by local shops. An economist would most likely explain Mary's
behavior by suggesting that
a. Mary's behavior is rational, but Maggie's behavior is clearly irrational.
b. Mary's behavior is clearly irrational, but Maggie's behavior is rational.
c. the Starbucks brand name suggests consistent quality.
d. the advertising by Starbucks in Florida is more persuasive than the advertising by Starbucks in Mary and Maggie's home town.
c
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In a short-run production process, the marginal cost is rising and the average total cost is falling as output is increased. Thus, marginal cost is
A) below average total cost. B) above average total cost. C) between the average variable and average total cost curves. D) below average fixed cost.
If a technological change reduced the amount of the variable input needed by a firm to produce a unit of output:
a. its AVC curve would shift down. b. its ATC curve would shift down. c. its MC curve would shift down. d. All of the above would occur.
______ is the expenditure needed to construct a building of equal utility to the existing building.
Fill in the blank(s) with the appropriate word(s).
A supply curve that intersects the horizontal (quantity) axis is:
A. unit elastic. B. perfectly elastic. C. elastic. D. inelastic.