Wholesale clubs charge a fixed monthly fee but then offer goods at discount prices. For purposes of this question, suppose a wholesale club and a supermarket offer the same composite grocery item, with the supermarket charging no fixed fee but a higher price for the item. (Assume no corner solutions.)
A. Anyone shopping at the wholesale club places less value on the marginal item bought than anyone shopping at the supermarket.
B. Anyone indifferent between the two stores buys more (or at least no less) if she chooses the wholesale club.
C. We cannot predict how much value different individuals place on the marginal item in each store because we cannot measure utility objectively.
D. Both (a) and (b) are true.
E. Both (b) and (c) are true.
Answer: D
You might also like to view...
List three reasons why one type of labor may be paid more than another
What will be an ideal response?
In the Solow model, the faster growth of output that results from an increase in the saving rate is temporary, because ________
A) of diminishing marginal product of capital B) with a larger stock of capital, consumption is encouraged more than investment C) the rising capital stock depreciates at a faster rate D) the economy settles into a steady state in which saving no longer rises
If the cost of labor decreases the isocost line will
A) stay the same. B) shift outward in parallel fashion. C) rotate outward around the point where only capital is employed in production. D) shift inward in parallel fashion.
As the number of firms in a Cournot oligopoly ________, the equilibrium quantity gets closer to the ________ equilibrium quantity.
A) decreases; perfectly competitive B) increases; monopoly C) increases; perfectly competitive D) decreases; monopolistically competitive