There are only two people in the world (Adam and Eve) and only one good (apples). Adam has four apples and a total utility in money terms from apple consumption of $16; Eve has four apples and a total utility from apple consumption of $20. Which of the following statements must be true?
A. Eve’s marginal utility from consuming her fourth apple must be greater than Adam’s marginal utility from consuming his fourth apple.
B. The total utility of society will rise if Adam gives Eve one apple.
C. If Adam and Eve each always has a positive marginal utility from consuming apples, the total utility of society can only be increased by an increase in the total number of apples available for consumption.
D. Adam’s average utility from consuming apples is greater than Eve’s average utility from consuming apples.
Answer: C
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Suppose that a person in the United States earns $5,000 and faces an income tax rate of 25 percent. If that person saves $2,000 and invests it at 12 percent then he or she will pay
A) less in taxes because of the saving. B) tax only on the income spent. C) more in taxes than if there had been no saving. D) tax only on the amount saved.
The effects of airline deregulation in the early to mid-1980s included all of the following except the
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