There are only two people in the world (Adam and Eve) and only one good (apples). Adam has four apples and a total utility in money terms from apple consumption of $16; Eve has four apples and a total utility from apple consumption of $20. Which of the following statements must be true?
A. Eve’s marginal utility from consuming her fourth apple must be greater than Adam’s marginal utility from consuming his fourth apple.
B. The total utility of society will rise if Adam gives Eve one apple.
C. If Adam and Eve each always has a positive marginal utility from consuming apples, the total utility of society can only be increased by an increase in the total number of apples available for consumption.
D. Adam’s average utility from consuming apples is greater than Eve’s average utility from consuming apples.
Answer: C
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A country that dollarizes
A) maximizes its seignorage. B) earns the same amount of seignorage as it would with a currency board. C) earns the same amount of seignorage as it would with exchange-rate targeting. D) eliminates its seignorage. E) must pay seignorage to other governments to use their currency.
Assume the short-run average total cost for a perfectly competitive industry remains constant as the output of the industry expands. In the long run, the industry supply curve will:
a. have a positive slope. b. have a negative slope. c. be perfectly horizontal. d. be perfectly vertical.
Which of the following is an implication of the law of diminishing returns?
a. Total output will decline as more workers are hired. b. In the long run, average total cost will eventually decline as output is expanded. c. In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost. d. A doubling of all inputs will lead to more than a doubling of output.
Marginal cost
A) cuts average variable cost and average fixed cost at their lowest point. B) cuts average variable cost and average total cost at their lowest point. C) rises and then falls. D) is the mirror image of marginal product.