Explain the difference between cardinal and ordinal utility. Which is better to use when modeling consumer behavior and why?
Please provide the best answer for the statement.
Cardinal utility is measured in exact numbers (such as 1, 2, and 3) which can be added, subtracted, multiplied, or divided as used in mathematical equations. This adds difficulty to consumer behavior models because it assumes a consumer can measure their utility in exact numbers. To solve this dilemma, ordinal utility is preferred. Ordinal utility is measured in relative rankings of whether someone likes one good more or less than another rather than exact numbers. A consumer can state relative preferences without having to use precise numbers; which is called indifference curve analysis.
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Assume an industry initially in equilibrium has a price floor imposed at a price above the equilibrium price. Total revenue received by the producers from sales will: a. rise as a result
b. rise as a result only if supply is elastic. c. rise as a result only if demand is elastic. d. rise as a result only if demand is inelastic.
The horizontal summation of individual demand curves gives the market demand curve for a public good
a. True b. False Indicate whether the statement is true or false
Suppose a firm anticipates that a particular R&D expenditure of $100 million will result in a new product and thus create a one-time added profit of $108 million a year later. The firm will:
A. undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. B. undertake the R&D expenditure if its interest-rate cost of borrowing is 10 percent. C. not undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent. D. not undertake the R&D expenditure if its interest-rate cost of borrowing is 7 percent.
Refer to the information provided in Figure 4.4 below to answer the question(s) that follow.
Figure 4.4Refer to Figure 4.4. Assume that initially there is free trade. If the United States then imposes a $25 tariff per barrel of imported oil, the tariff revenue generated will equal
A. $25 million per day. B. $50 million per day. C. $100 million per day. D. $125 million per day.