Explain why equalizing the marginal utility per dollar for all goods maximizes utility
What will be an ideal response?
Equating the ratio of marginal utility per dollar for each good and service consumed maximizes utility because it measures the utility gained when an additional dollar of a good or service is consumed. This allows the consumer to weigh the utility gained from additional consumption of a dollar's worth of one good against the utility lost from the forgone consumption of a dollar's worth of another good. When the marginal utility per dollar for each good and service is equalized, there is no additional utility available from any other consumption combination.
You might also like to view...
The median-voter theorem would suggest the reason politicians go from extreme to moderate positions on an issue over the course of an election is because they are appealing to the:
A. average voter in their party in the primary, and the average of all voters in the general election. B. majority of voters in their party in the primary, and the majority of all voters in the general election. C. median voter in their party in the primary, and the median of all voters in the general election. D. people in their party and opposing party.
Define the "consumption function."
What will be an ideal response?
In 2013, which component of U.S. GDP had a negative value?
A) government spending B) investment C) net exports D) Components of GDP cannot have a negative value.
According to the new classical view, changes in aggregate demand
a. can temporarily influence output b. affect only the aggregate price level. c. can influence output but at the cost of higher inflation. d. are primarily driven by changes in investment. e. Both a and c