Explain the conditions that are met when a consumer has found the best affordable combination of goods to buy. (Use the terms budget line, marginal rate of substitution, and relative price in your explanation.)
What will be an ideal response?
At the optimal consumption choice, the consumer's consumption bundle is
1) on the budget line,
2) on the highest attainable indifference curve,
3) such that the slope of the budget line, which is the relative price of the two goods, equals the slope of the indifference curve, which is the MRS.
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The additional utility that George receives from consuming one more slice of pizza is called
A) diminishing utility. B) total utility. C) average utility. D) marginal utility.
A stimulus to aggregate demand will normally pull prices up but cause a reduction in output
a. True b. False Indicate whether the statement is true or false
Dairy farmers use sawdust for milk cow bedding. What happened to the price of milk because of the housing slowdown in 2007?
A) The price of milk rose as the demand for milk rose. B) The price of milk rose as the supply of milk decreased. C) The price of milk fell as the demand for milk decreased. D) The price of milk fell as the supply of milk increased.
Assume that a purely competitive firm uses two resources, labor (L) and capital (C), to produce a certain product. In which situation would the firm be maximizing profit?
A. Case A
B. Case B
C. Case C
D. Case D