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For economist the word utility means

Pleasure and Satisfaction

A person should consume more of something when its marginal

benefit exceeds its marginal cost.

The assertion that "There is no free lunch" means that

all production involves the use of scarce resources and thus the sacrifice of alternative goods.

An increase in money income:

shifts the consumer's budget line to the right.

Any combination of goods lying outside of the budget line

is unattainable, given the consumer's income.

The two general types of economic systems that exist today are

market systems and command systems.

Economic scarcity

applies to all economies

Which of the following is a fundamental characteristic of the market system?

property rights.

Specialization in production is important primarily because it

results in greater total output.

Which of the following is one of the Five Fundamental Questions?

What goods and services will be produced?

In a competitive economy prices:

influence consumers in their purchases of goods and services.
influence businesses in their purchases of economic resources.
influence workers in making occupational choices.

. The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially

"At least-cost production."

The law of demand states that:

price and quantity demanded are inversely related.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes:

the income effect.

If two goods are complements:

a decrease in the price of one will increase the demand for the other.

If consumers are willing to pay a higher price than previously for each level of output, we can say that, the following has occurred:

An increase in demand

An increase in demand means that

The demand curve has shifted to the right

The price elasticity of demand coefficient measures

Buyer Responsiveness to price changes

Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand.

If the demand for product X is inelastic, a 4 percent increase in the price of X will

If a firm can sell 3,000 units of product t $10 per unit and 5,000 at $8, then:

The price elasticity of demand is 2.25

A perfectly inelastic demand curve

Graphs as a line parallel to the vertical axis.

The ILLinois central railroad once asked the ILLinois commerce commission for permission to increase its commuter rates by 20 percent. The railroad argues that declining revenues made this rate increase essential. Opponents of the rate increase contented that the railroads revenues would fall because of the rate hike. It can be concluded that

The railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic

marginal utility can be

Positive, negative or zero

The first Pepsi yields Craig 18 units and the second yields him and additional 12 units of utility. His ttal utility from three pepsis is 28 units of utility. The marginal utility of the third pepsi is

8 units of utility

The theory of consumer behavior assumes that

Consumers behave rationally, maximizing their satisfactions

If a consumer chooses a combination of goods that lies inside of her budget line, the consumer

could obtain more goods with her money income

When externalities cause substantial positive benefits for third parties, competitive market

Under-allocates resources to the production of the good

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