Suppose that for Alicia the marginal benefit (MB) of producing is $75 and that the marginal cost (MC) of producing is $5. Suppose also that her marginal benefit of stealing is $85 and the marginal cost of stealing is $5. Is Alicia currently maximizing utility in terms of producing and stealing? If not, should she produce more and steal less, or produce less and steal more to move toward utility maximization?
A. Yes, Alicia is maximizing utility.
B. No, Alicia is not maximizing utility. Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing, Alicia should produce more and steal less.
C. No, Alicia is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Alicia should produce more and steal less.
D. No, Alicia is not maximizing utility. Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing, Alicia should steal more and produce less.
Answer: D
You might also like to view...
If resource prices rise and the average total cost of producing a product increases as the firms in an industry expand output in response to an increase in demand, the long-run market supply curve for the product will
a. be perfectly elastic (a horizontal line). b. be perfectly inelastic (a vertical line). c. slope upward to the right. d. be more inelastic than the short-run supply curve for the product.
For a firm selling its product in a purely competitive market, the marginal revenue product of labor can be found by:
A. adding marginal product to total product as one more unit of labor is employed. B. adding marginal revenue to total product as one more unit of labor is employed. C. multiplying marginal product by product price. D. dividing marginal product by product price.