Terence has $50 per week to spend on Subway sandwiches and milkshakes. The price of a Subway sandwich is $5 and the price of a milkshake is $4. He buys 6 sandwiches and 5 milkshakes. The marginal utility of the 6th sandwich = 25 and the marginal utility
of the 5th milkshake = 24. Which of the following is true?
A) He is not maximizing his utility and should buy more milkshakes.
B) He is maximizing his utility.
C) He is not maximizing his utility and should buy more Subway sandwiches.
D) He is not maximizing his utility because he is not spending all of his income.
Answer: A
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a. added little to economic fluctuations. b. strongly influenced capital formation. c. caused the three major financial crisis of that era. d. All of the above are correct. e. Only b and c are correct.
Setting price equal to marginal cost in a natural monopoly will lead to
a. excess profits for the firm. b. losses for the firm. c. zero profits for the firm. d. One cannot tell without further information.
People sometimes act differently in different settings. An economist is likely to explain this by saying
A) the benefits and costs of certain behaviors can be different in different settings. B) people are hard to figure out. C) people behave as others behave. D) it is hard to figure out what makes people tick. E) none of the above
Division of labor increases the output of society by
A. ensuring that people are happier in performing their work. B. eliminating scarcity. C. reducing the choices people have to make to a more manageable number. D. allowing resources to specialize in the tasks for which they have a comparative advantage.