Why is the benefit of something measured by what you are willing to give up?
What will be an ideal response?
The benefit of a good or service, say a slice of pizza, is the pleasure it brings the consumer. But it is impossible to measure someone's pleasure. In order to measure the benefit of the slice of pizza, we need something that we can measure. Thus, to measure the benefit of the slice of pizza, we ask the consumer what he or she is willing to give up to get the slice of pizza. So, if the consumer was willing to give up, say, three hot dogs to get the slice of pizza, we can determine that the benefit of the slice of pizza to the consumer is three hot dogs.
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Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers
a. both labor and capital to be fixed. b. both labor and capital to be variable. c. labor to be variable and capital to be fixed. d. capital to be variable and labor to be fixed.
A profit maximizing monopoly's price is
A) the same as the price that would prevail if the industry was perfectly competitive. B) less than the price that would prevail if the industry was perfectly competitive. C) greater than the price that would prevail if the industry was perfectly competitive. D) not consistently related to price that would prevail if the market was perfectly competitive.