The price of product X is $3, the price of product Y is $2, and you have $18 to spend. What combination of product X and product Y will give you the most satisfaction?
A. 2 units of product X and 5 units of product Y
B. 4 units of product X and 3 units of product Y
C. 3 units of product X and 5 units of product Y
D. 5 units of product X; 1 unit of product Y
Answer: B
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If average variable cost exceeds average fixed cost at a particular level of output: a. Profits must be positive
b. That fact is meaningless for deciding the quantity of output to produce. c. It is more likely that the output level is low relative to the designed capacity of the production facility than that the output level is low relative to the designed capacity of the production facility. d. Both b and c. are likely true.
The force that leads to zero economic profits for monopolistically competitive firms in the long run is
a. excess capacity. b. price wars among firms. c. entry by new firms. d. excessive advertising.
A Hicksian, or compensated, demand curve reflects:
A. only the substitution effect of a price change. B. only the income effect of a price change. C. both the income and substitution effects of a price change. D. neither the income nor the substitution effects of a price change.
Many theaters sell empty seats at a deep discount just before show time. What economic concept is displayed by this behavior?
A. Price optimization B. Thinking at the margin C. Sunk costs D. Consumer demand