Despite the fact that water is necessary to sustain life, it is less expensive than milk. Economic theory suggests that this is so because
A. there is a conspiracy among milk producers to hold prices artificially high.
B. sellers of water hold the price of water artificially low because of its importance.
C. although the total utility of water consumption is high, its marginal utility per dollar spent is low when compared to milk.
D. consumers are irrational.
Answer: C
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The vertical distance between a firm's average total cost curve, ATC, and its average variable cost curve, AVC
A) decreases as output increases. B) is equal to its marginal cost, MC. C) is equal to its total fixed cost, TFC. D) is equal to its average product.
A normal rate of return on investment is equal to
A. accounting profit plus economic profit. B. total revenue plus total accounting profit C. accounting profit minus economic profit. D. the opportunity cost of capital plus any other implicit costs.
A company will strive to minimize
A) transaction costs. B) costs of internal operations. C) total costs of transactions and internal operations combined. D) variable costs.
The official poverty income threshold in the United States is
A. based on the cost of a budget that includes food, clothing, and shelter. B. never adjusted for the effects of inflation. C. the same for all families independent of the number of people in the family. D. calculated as three times the cost of a minimally acceptable diet for a family.