The theory of consumer choice is based on the hypothesis that each consumer wants to
A. maximize her total utility.
B. maximize her marginal utility.
C. minimize the rate at which her marginal utility diminishes.
D. minimize the percentage of her consumption diverted to inferior goods.
Answer: A
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For a fixed percent reduction in pollution emissions to be economically efficient, it would have to be the case that:
A. all firms be the same size. B. enforcement is vigorous. C. the marginal cost of pollution control is the same across all firms. D. large polluters reduce emissions by more than small polluters.
A perfectly elastic demand curve for a firm
A. is represented by a vertical line. B. means that with every unit price increase there will be a unit decrease in demand. C. is formulated by P× Q = a constant, for all prices and quantities. D. indicates that any increase in price will eliminate all purchases of its product.
Suppose a plaintiff hires a lawyer to represent her in a court case. She agrees to pay the lawyer a wage per hour
She knows precisely what the lawyer should do and how long each activity should take, and she can verify that the lawyer has correctly completed each activity. She can terminate the contract at any time. With this contract, A) the lawyer bears all the risk. B) the risk is shared by the lawyer and the plaintiff. C) production efficiency can be achieved. D) production efficiency is impossible.
If the demand for illegal drugs is inelastic, then a government policy to cause their price to increase would cause total revenue from drug sales to:
A. rise. B. fall. C. stay the same. D. drop to zero.