Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000 . The marginal cost of making a wedding cake is $200 . In order to maximize profits, Laura should
a. make more than 20 wedding cakes per month.
b. make fewer than 20 wedding cakes per month.
c. continue to make 20 wedding cakes per month.
d. We do not have enough information to answer the question.
a
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Suppose you have spent your entire budget and, for all the goods you purchase, the marginal utilities per dollar spent are identical. Which of the following is true?
a. You are being irrational. b. You can increase your utility by reallocating your income. c. You will reduce your utility if you allocate income in any other way. d. You are minimizing your marginal utility. e. You can avoid diminishing marginal utility.
A low P/E for a stock indicates that
a. people may expect earnings to fall in the future, perhaps because the firm will be faced with increased competition. b. its dividends have been low so that no one is willing to pay very much for it. c. the corporation is possibly overvalued. d. All of the above are correct.