Question

2. If total utility is not listed in a chart showing the number of apples consumed

a. it is impossible to determine.

b. it can be indirectly calculated by looking at total costs.

c. it still can be determined by adding the sums of all the marginal utilities.

d. both b) and c) are correct.

3. The rational economic being who compares costs and benefits

a. does not think about the marginal costs and benefits, only the total costs and benefits.

b. does not really exist and the model is not a realistic guide to human behavior.

c. shows how real people behave, even if one does not realize one is making these calculations.

d. existed in Adam Smith’s time but not today

15. The writer notes that the industry needs to increase its capacity to deliver today’s increasing demand for phone service. He comments that consolidating the two firms may be the only way to increase capacity “without going broke.” He is focusing on

a. the need for economic profits in the industry.

b. rising average total cost as output increases.

c. economies of scale in the industry.

d. all of the above

22. Externalities

a. can lead to a better market outcome if they are external benefits.

b. are a form of market failure.

c. properly match all benefits with all costs.

d. can be defined as third-party effects of a market transaction.

e. both b) and d) are correct

Answer 1

2. If total utility is not listed in a chart showing the number of apples consumed OPTION C. it still can be determined by adding the sums of all the marginal utilities. This is because marginal utility is the additional utility received from consumption of one additional apple. If marginal utility is added for each additional apple, we can get the total utility for those apples consumed.

3. The rational economic being who compares costs and benefits OPTION C. shows how real people behave, even if one does not realize one is making these calculations. This is because cost and benefit analysis is based on comparison made on marginal basis. People may not realize it when they conduct such analysis.

15.OPTION D all of the above. This is because when two firms are merging, there are economic of scale resulting from combined production. This also helps in maintaining profits and sustaining in the long run.

22. Externalities OPTION E. are a form of market failure and can be defined as third-party effects of a market transaction. This is because externalities can both be negative and positive and they result because there are spillover effects not limited to buyers and sellers but the society also that does not participate in transaction.