After reading the nutritional label on the box of his favorite cookies, Ernesto

Question

After reading the nutritional label on the box of his favorite cookies, Ernesto was shocked to discover the high sugar content. As a result, cookies don’t bring him the same satisfaction anymore, falling from 25 utils to 12 utils. Benefiting from more efficient machinery, Ernesto’s favorite cookie manufacturer also lowered the price per box. What happens to Ernesto’s marginal utility per dollar spent?

There is not enough information to determine.

The rate of change decreases.

It increases.

It decreases.

It stays the same.

Question 6 0.4 pts With no barriers to entry or exit and when firms in a market are operating at a loss, we can expect other firms to exit, causing the ________ curve to shift to the ________ and making the equilibrium price ________ and the equilibrium quantity ________.

demand; right; increase; increase supply; left; increase; increase demand; left; decrease; decrease supply; left; increase; decrease supply; right; decrease; increase

If the owner of Kuji’s Treats finds that, in the long run, he can trade one type of input for another, the price elasticity of supply is perfectly elastic.

perfectly inelastic.

relatively inelastic.

unitary elastic.

relatively elastic

.Which of the following statements best represents the fact that Logan cannot put in extra hours of work because of scarcity?

He doesn’t want his coworkers to feel pressure to work more because he is working additional hours.

He doesn’t think that overtime pay is high enough.

He is worried that if he works extra hours, he will get bored with his job.

He doesn’t like going to work, so why would he work more than he has to?

He doesn’t have enough time for additional work because he needs to spend time with his family and there are only so many hours in the day.

Explanation / Answer

1) When the utility per cookie fell from 25 to 12 utils at the same price , the marginal utility per dollar decreased . But now price per box has declined . So the marginal utility per dollar will definitely not decrease as much as before . It may also remain same . But we cannot say definitely since the exact price and price fall is not given . But we can say that the rate of change in marginal utility decreases . Answer : The rate of change decreases.

2) With no barriers to entry or exit and when firms in a market are operating at a loss, we can expect other firms to exit, causing the supply curve to shift to the left and making the equilibrium price increase and the equilibrium quantity decrease . Answer : supply; left; increase; decrease

3) relatively elastic. We cannot say it is perfectly elastic till we the quantities that can be traded .

4) He doesn’t have enough time for additional work because he needs to spend time with his family and there are only so many hours in the day.

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