The law of diminishing marginal utility means that:
a. marginal utility is maximized when consumers get the same amount of total utility from every good they consume.
b. total utility is maximized when consumers get the same amount of marginal utility from the last unit of every good they consume.
c. beyond some point, added units of a product provide lower and lower amounts of marginal
utility.
d. a consumer would get less utility from the last unit of a good consumed when that good costs $3 than when it costs $1.
c
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
The government safety net creates both an adverse selection problem and a moral hazard problem. Explain
What will be an ideal response?
Forward contracts are of limited usefulness to financial institutions because
A) of default risk. B) it is impossible to hedge risk. C) they are relatively inflexible. D) of interest-rate risk.
Opportunity cost is the value of
A) the best (or most highly valued) forfeited alternative. B) the chosen alternative. C) a free good. D) all forfeited alternatives.