Explain how a rational consumer decides which goods to buy.
What will be an ideal response?
Rational consumers are aware of their budget constraints and are aware of the available products and their prices. In addition, they know how much utility they get from buying each good. The consumers will want to find the combinations of goods that give them the most satisfaction for the money. Buying each product that yields the highest marginal utility per dollar first, and continuing until they exhaust their budgets, will result in the highest total utility. The marginal utility per dollar across all goods in the consumption bundle will be the optimal combination of goods.
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Industries, where economies of scale dictate that only a few firms produce, will be efficient if the markets in which they sell are
A. perfect. B. contestable. C. close to each other. D. protected from entry.
A college professor berates his political science students for being uninformed on current political and government issues. For example, most of them do not know who represents them in the U.S. House of Representatives. He tells his students that they will never get very far in life by staying so uninformed and uninterested. The professor is probably overlooking the fact that
A) people are uninformed and uninterested in only some things-not all things. B) his students could be choosing rational ignorance. C) by not taking out time to find out certain things, his students have more time to study for his tests. D) a, b, and c E) none of the above
Answer the following statement(s) true (T) or false (F)
1.If the Fed pursues a expansionary monetary policy on the open market, then U.S. exports will most likely decrease. 2.With the velocity of money, V represents the average number of times that each dollar is used in purchasing final goods or services in a one-year period. 3.According to the equation of exchange, the value of goods purchased is more than the value of goods sold. 4.The quantity theory of money and prices is the hypothesis that changes in the money supply lead to equal proportional changes in the price level. 5.The time lag is typically longer for adopting monetary policy changes than fiscal policy changes.
Which of these is a likely impact of a decrease in the price level in an economy on the aggregate supply in the economy?
a. An increase in the quantity of real GDP supplied b. A decrease in the quantity of real GDP supplied c. A leftward shift of the aggregate supply curve d. A rightward shift of the aggregate supply curve e. An increase in the slope of the aggregate supply curve