Mr. Smith is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 20 units for wine. Mr. Smith should
A) consume twice as much beer as wine.
B) consume twice as much wine as beer.
C) increase his consumption of beer relative to wine.
D) increase his consumption of wine relative to beer.
Answer: C
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If the price of oil rises, the
A) AD curve and the AS curve shift rightward, the price level rises, and real GDP decreases. B) AS curve shifts leftward, the price level rises, and real GDP decreases. C) AD curve and the AS curve shift leftward, real GDP decreases, and the price level rises. D) AD curve shifts rightward, real GDP increases, and the price level rises. E) AS curve shifts leftward, the price level rises, and real GDP increases.
Freedom of entry and exit in monopolistic competition
A) means that firms' price and average total cost of producing are always equal. B) never allows firms to earn economic profits. C) leads to falling prices when new firms enter the market. D) forces firms to abandon product differentiation but only in the long run.