Which of the following statements is FALSE, with respect to what economist Adam Smith called the diamond-water paradox?
A. There are relatively few diamonds, so the marginal utility of the last diamond consumed is relatively high.
B. Total utility does not determine what people are willing to pay for a unit of a particular commodity; marginal utility does.
C. The total utility of water greatly exceeds the total utility derived from diamonds.
D. The demand for water is much smaller than the demand for diamonds.
Answer: D
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Refer to the figure above. When the demand curve for gas is D2 and the supply curve for gas is S, the surplus in the market when price is $8 is:
A) 20 gallons. B) 55 gallons. C) 25 gallons. D) 50 gallons.
A business firm should refuse to sell any item for which it cannot obtain a price at least as large as what
A) it cost the firm to produce the particular item. B) it costs the firm on average to produce the item. C) it would cost the firm to produce another item identical to the item being sold. D) the item will be worth to the firm if not sold.
First-past-the-post voting entails:
A. a series of votes with two options; the winner of the first vote is paired with another option until all options have been voted on in pairs and there is one winner. B. voters ranking all available options and the option most approved of wins. C. one vote with many options, and the option with the most votes wins. D. one vote with many options, and the option that gets to 51% wins.
Which statement is true?
A. Rent control is a price floor. B. A usury law is a price floor. C. The minimum wage law is a price floor. D. None of these statements are true.