Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes. Due to differences in caffeine levels, his MRS of tea for coffee equals 2. If coffee and tea sell for the same price, Johnny will
A) spend all $30 on tea.
B) spend all $30 on coffee.
C) spend $20 on coffee and $10 on tea.
D) be indifferent between any bundle of coffee and tea costing $30.
B
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A decrease in the marginal product of labor would be represented by
a. increase in labor demand. b. decrease in labor demand. c. increase in the quantity demanded of labor. d. decrease in the quantity demanded of labor. e. an increase in wages.
Which of the following statements is TRUE about the economic profits earned by a monopolistic competitor firm in the long run?
A. Economic profits will be positive since the firm has a downward sloping demand curve. B. Economic profits can be negative since there is so much competition in the market. C. Economic profits can be positive since firms have some degree of monopoly power. D. Economic profits will tend towards zero since positive profits will attract new firms into the industry.