Carol is very hungry. She has just sat down to eat. Her first bite gives her a certain level of utility. Her second bite increases her utility by more than the first bite. Her third bite increases her utility by more than the second bite. Carol has 40
bites left before she finishes. Which of the following statements is TRUE about Carol?
A) Carol is being inconsistent with the law of diminishing marginal utility.
B) Carol's total utility decreases with each bite.
C) Carol's marginal utility will be negative when she takes her last bite.
D) Carol will eventually experience diminishing marginal utility by the time she finishes eating, if her marginal utility begins to decline.
Answer: D
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Fiscal policy
a. is dangerous in the short run because it crowds out investment spending b. can change equilibrium GDP in the short run c. can change equilibrium GDP in the long run d. can change equilibrium GDP in both the long and the short run e. is dangerous in the long run because it triggers a multiplier effect
Refer to Figure 2.4. The elasticity of demand at point a is given by:
A. the slope of line cd times (P1/Q1).
B. the slope of line ab times (Q1/P1).
C. the inverse of the slope of line cd times (P1/Q1).
D. the inverse of the slope of line ab times (Q1/P1).