The price of a piece of pizza is $1 and the price of a movie is $4 and the consumer has $10. A consumer has purchased 2 pieces of pizza and 2 movies, receiving 25 units of utility for the second pizza and 100 units of utility for the second movie. The set of goods
A. is an optimum since the entire income is spent and total utility is minimized.
B. is not an optimum because the marginal utility per dollar spent is greater for pizza than for movies.
C. is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.
D. is not an optimum because the consumer has not spent all of his money.
Answer: C
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Three hundred paper mills compete in the paper market. The total cost of production (in dollars) for each mill is given by the formula TC = 1,000Qmill + (Qmill)2, where Qmill indicates the mills annual production in thousands of tons. The marginal external cost of a mill's production (in dollars) is given by the formula MEC = 200 + 2Qmill. Finally, annual market demand (in thousands of tons) is given by the formula Qd = 200,000 - 100P. What is the efficient quantity?
A. 34,286 B. 131,429 C. 1,200 D. 90,000
The law of increasing additional cost is due to
A) scarcity. B) inefficient use of technology. C) the fact that resources are not perfectly adaptable for alternative uses. D) the fact that there are always alternatives and it is costly to figure out which alternative is best.
A regulated firm may have an incentive to spend an inefficiently high amount on capital when:
a. it becomes deregulated. b. fair rate of return regulation is used. c. regulators set price equal to marginal cost. d. it is part of a monopolistically competitive industry. e. it is allowed to charge a monopoly price.
If a firm is able to charge a higher price for its output, all else equal, the value of the marginal product of labor will decrease to offset the higher price
a. True b. False Indicate whether the statement is true or false