Irving R. Associates is granted a patent for a new product for which there are no close substitutes. Which of the following must be true at the profit-maximizing quantity?
a. Price is equal to marginal cost.
b. Average revenue is equal to marginal cost.
c. Marginal revenue is positive.
d. Marginal revenue is less than marginal cost.
e. Price is greater than average revenue.
C
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As more of a good is consumed, marginal benefit ________ and as more of a good is produced, marginal cost ________
A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases E) does not change; does not change
In his Liquidity Preference Framework, Keynes assumed that money has a zero rate of return; thus
A) when interest rates rise, the expected return on money falls relative to the expected return on bonds, causing the demand for money to fall. B) when interest rates rise, the expected return on money falls relative to the expected return on bonds, causing the demand for money to rise. C) when interest rates fall, the expected return on money falls relative to the expected return on bonds, causing the demand for money to fall. D) when interest rates fall, the expected return on money falls relative to the expected return on bonds, causing the demand for money to rise.