Explain the paradox of value
What will be an ideal response?
The paradox of value questions why water, which is essential for life, costs less than diamonds, which are not. This puzzle can be resolved by realizing the difference between marginal utility and total utility. Water has high total utility, but because we consume so much water, the last unit has little value, that is, the water has low marginal utility. Diamonds have little total utility, but because we consume few diamonds, the last unit of diamonds has high marginal utility.
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If the marginal cost of producing a television is constant at $200, then a firm should produce this item
A) as long as the marginal benefit it receives is just equal to or greater than $200. B) only if the marginal benefit it receives is greater than $200 plus an acceptable profit margin. C) as long as its marginal cost does not rise. D) until the marginal benefit it receives reaches zero.
If net exports decrease by 250 and the mpc is 0.75, equilibrium aggregate output
A) increases by 1000. B) increases by 750. C) decreases by 750. D) decreases by 1000.