Suppose the marginal value of bread in terms of wine is 1/2 bottle of wine per loaf of bread, while the relative price of bread in terms of wine is 1/4 bottle of wine per loaf of bread. Explain how the consumer can adjust his purchases to raise his level of satisfaction.
What will be an ideal response?
The marginal value indicates that the consumer is willing to pay up to 1/2 bottle of wine in exchange for 1 loaf of bread. Under the given market prices, the consumer has to sacrifice only 1/4 bottle of wine to purchase 1 loaf of bread, so this opportunity is a good deal for the consumer. The consumer's satisfaction level will increase if he buys less wine and more bread, because the value he places on additional bread is greater than the price he must pay in the market.
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Which of the following is true?
i. The advanced economies account for more than half of global production. ii. Almost four out of every five people in the world live in the developing economies. iii. In the advanced economies, agriculture accounts for a larger part of total production than in the developing economies. A) Only i and ii B) i, ii, and iii C) Only i D) Only ii and iii E) Only i and iii
La Dila and Swiss Pro are the only two firms in an industry. The firms charge equal prices for their products, which are perfect substitutes. La Dila decides to lower its price slightly. Swiss Pro responds by cutting its price further
This price cutting will continue as long as each firm's ________. A) price is lower than marginal cost B) price is higher than marginal cost C) price is higher than zero D) price is higher than the average fixed cost
A perfectly competitive firm has a total revenue curve that is
A) upward sloping with an increasing slope. B) downward sloping with a constant slope. C) upward sloping with a decreasing slope. D) upward sloping with a constant slope.
In monopolistically competitive markets, advertising is an ____ type of non-price competition because it is used to ____ the demand for a firm's products
a. important; increase b. unimportant; increase c. important; decrease d. unimportant; decrease