Kelly has decided that she would enjoy eating another cupcake. Which of the following statements is consistent with Kelly's decision?
A) Kelly's marginal utility has decreased with a corresponding decrease in total utility.
B) Kelly's marginal and total utility remain unchanged.
C) Kelly's marginal utility has decreased but it is unclear what has happened to total utility.
D) Kelly's total utility has increased but it is unclear what has happened to her marginal utility.
Answer: D
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When the federal government makes no attempt to take corrective action, markets return a recessed economy to full employment levels of production by
(a) laying off workers. (b) lowering wages. (c) dropping prices. (d) doing all of the above.
The income effect of a decrease in the price of legal services (a normal good) is a(n)
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Suppose, at its present rate of output, a perfectly competitive firm's marginal revenue exceeds both its marginal cost and its average variable cost. To maximize profit, the firm should
a. lower the price b. raise the price c. increase output d. reduce output e. maintain its current rate of output