Suppose that for Jim the marginal benefit (MB) of producing is $60 and that the marginal cost (MC) of producing is $10. Suppose also that his marginal benefit of stealing is $50 and the marginal cost of stealing is $10. Is Jim currently maximizing utility in terms of producing and stealing? If not, should he produce more and steal less, or produce less and steal more to move toward utility
maximization?
A) Yes, Jim is maximizing utility.
B) No, Jim is not maximizing utility. Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing, Jim should produce more and steal less.
C) No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should produce more and steal less.
D) No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should steal more and produce less.
C
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Both presidents Kennedy and Reagan proposed significant cuts in income taxes because
A) they wanted to offset their proposals to increase other taxes. B) they believed that the tax cuts would enhance economic efficiency. C) state governments had increased their taxes and they believed the tax cuts they proposed would result in most citizens paying about the same total state and federal taxes. D) at the time of their proposals the federal government was experiencing budget surpluses; that is, tax revenue exceeded government expenditures.
An increase in worker productivity will lead to a
A. Negative demand shock B. Positive demand shock C. Negative supply shock D. Positive supply shock