Why is it that the consumer can maximize total net utility only if the purchase quantity brings marginal utility as close as possible to equality with price?
The decision to purchase a quantity of a good that leaves marginal utility greater than price cannot maximize total net utility, because buying an additional unit would add more to total utility than it would increase cost. Similarly, it cannot be optimal for the consumer to buy a quantity of a good that leaves marginal utility less than price, because then a reduction in the quantity purchased would save more money than it would sacrifice in utility. Consequently, the consumer can maximize total net utility only if the purchase quantity brings marginal utility as close as possible to equality with price.
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When would it be plausible to describe the demand for a product by drawing a straight line, Q = a - bP?
A. Only if no important factors other than price affect demand B. In the vast majority of scenarios C. Practically never D. If we believe that factors other than price alone determine demand
In 2012, the United States imposed countervailing duties ranging from 24 to 36% (on imports of about solar panels from China. Which of the following do you predict will happen if the United States decides to eliminate these duties?
a. The U.S. price of solar panels will fall. b. U.S. production of solar panels will rise. c. U.S. imports of Chinese solar panels will fall. d. The U.S. price of solar panels will rise.