If I use 1,000 gallons of water a month at a price of $.01 a gallon, is my consumer surplus likely to be large or small? Explain
The 1,000th gallon will yield no consumer surplus, since MU = P is the decision rule for optimal purchases. But since MU declines, all gallons before 1,000 will yield CS. The first gallons will have particularly high CS, since if I had to forgo any drinking water, water for showers, and water to keep my plants alive, I would lose a lot of utility. In sum, CS is likely to be large.
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The official mission of the World Bank is to
A) establish exchange rates between the currencies of member nations. B) provide funding for needed development projects that would have difficulty attracting private investment. C) advise member nations on the appropriate levels of taxation. D) fight global inflation.
During a recession, the duration of unemployment ________ and the unemployment rate is ________ the natural rate of unemployment
A) does not change; equal to B) shortens; equal to C) shortens; greater than D) lengthens; less than E) lengthens; greater than