Question

7. The diamond-water paradox is easily resolved once one recognizes that the price of a product tends to reflect its use value. total value. consumer surplus. marginal value. dodo Which of the following relationships is true? Average variable cost will equal marginal cost when marginal cost is minimized. Average variable cost will equal marginal cost at all relevant level of output. Marginal cost will equal fixed costs when fixed costs are equal to zero. Marginal cost will equal average cost at the minimum point of average cost. Average variable cost will equal marginal product when marginal product reaches its lowest level. a. As consumption of a good decreases, total utility increases and marginal utility increases. increases and marginal utility decreases. decreases and marginal utility increases. decreases and marginal utility decreases. d. 10. sos Utility is maximized by a consumer when the marginal utility per dollar spent is equal for all goods. marginal utilities are all zero. marginal utilities are all maximized. marginal utilities are all negative.

Answer 1

7. Marginal value

Reason: The diamond water paradox states that price reflects the marginal value of each good consumed and not its total use value

8. (C) MC will equal AC at the minimum point of AC

Reason: At the lowest point of AVC, the MC cuts AVC curve

9. (C) Decreases and MU increases

Reason: As consumption falls, total utility falls. However, MU increases at lower units of consumption

10. (B) Marginal utilities are all 0

Reason: TU is maximized at the point dTU/dQ = 0

Or, MU = 0