The Law of Diminishing Marginal Benefit states that:
A) the demand for a commodity declines as its price increases.
B) the demand for a commodity is more dependent on income than on price.
C) the willingness to pay for an additional unit declines as more of a good is consumed.
D) lower levels of consumption give lower level of utility.
C
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Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases:
A) the opportunity cost of buying sweaters increases. B) the opportunity cost of buying sweaters decreases. C) the opportunity cost of buying shirts increases. D) There is no change in the opportunity cost of consuming either good.
If the price of one good increases by 3 percent and the quantity demanded of another good increases by 2 percent, the cross elasticity is ________ and the two goods are ________
A) 2/3, substitutes B) 2/3, complements C) 3/2, complements D) 3/2, substitutes
Third-degree price discrimination exists when
A) the seller knows exactly how much each potential customer is willing to pay and will charge accordingly. B) different prices are charged by blocks of services. C) when the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups. D) when the seller will bargain with buyers in each of the markets to obtain the best possible price.
The wage of a known high-quality worker, wh, is $10,000. The wage for a known low-quality worker, wl, is $4,000. The share of the work force that is of high quality, s, is 0.5. For what value of the cost, c, of a college education that serves only as a signal of a high-quality worker does a pooling equilibrium exist?
A) c > $3,000 B) c < $3,000 C) c < $1,000 D) c = $2,500