23) Which of the following is likely to occur as the result of the law of dimini
ID: 1128727 • Letter: 2
Question
23) Which of the following is likely to occur as the result of the law of diminishing, marginal u CA) Hudson enjoyed his second slice of pizza more than his first. B) Sabine's utility from her first granola bar is greater than Rachel's utility frm utility? 23) granola bar C) Petra's ut d D) Wesley from her second apple was less than her satisfaction from her first orange. enjoyed his second bottle of iced tea less than his first bottle, other thing constant Table 3 Quantit Bu Salads 192 144 96 48 1os 72 18 Madison has $51 to spend each week on burgers and salads. The price of a burger is $6 and the price of a salad is $9. The table shows Madison's marsinal utility from different quantities of the two items. 24)_ 24) Refer to Table 3. What is Madison's optimal consumption bundle? A) 3 burgers and 4 salads C) 0 burgers and 6 salads B) 1 burger and 5 salads D) 4 burgers and 3 salads 25) a total cost of $1,000 and a variable cost is $700, If a firm produces 20 units of output and incurs calculate the firm's average fixed cost of production if it expands output to 25 units. 25) A) $300 B) $15 C) $12 D) It is impossible to determine without additional information. 26) 26) The prisoner's dilemma illustrates A) why firms have an incentive to cheat on agreements. B) how oligopolists engage in implicit collusion under strategic situations. C) why firms will not cooperate if they behave strategically. D) how cooperation in strategic situations leads to the economically efficient market outcome. 27) Which of the following is an example of a way in which an oligopolistic firm can escape the 27) A) reneging on a previous tacit agreement with rival firms to charge identical high prices B) producing more of its product C) ignoring the pricing decisions of the other firms D) advertising that it will match its rival's price prisoner's dilemma?Explanation / Answer
23) D) Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.
The Law of diminishing utility states that , in case of a good , each unit of extra consumption will reduce its marginal utility. So, Wesley will always enjoy less than before after consumption of one more bottle of iced tea.
24) B) 1 burger and 5 salads
As it is the optimal consumption bundle for Hudson, where is total marginal utility is = 192+18= 210 , and it costs = $51+$30= $81. it is the quantity of burger and salad that Hudson should consume to get the optimal consumption
25) C) $12
Total Cost = $1000, Variable Cost =$700
Fixed cost = Total Cost - Variable cost = 1000-700 = 300
Increased Output= 25 units
Average Fixed cost = (300/25) = 12
26) C) why firms will not cooperate if they behave strategically.
In case of prisoner's dilemma, each prisoner tries to get better off by not co-operating each other because of the uncertainity of other's choice.
27) D) Advertising that it will match its rival's price.
As, in oligopolistic market, few no. of firms have the largest share of market, each can always avoid prisoner's dillema by advertising that it will match its rival's price. In this way,Consumers will not get affected by the pricing decision of each firm. This will be better off for both firms.
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