Use the Following Two Statements to Answer This Question

question 128

Multiple Choice

Use the following two statements to answer this question:
I. If utility is ordinal, a market basket that provides 30 utils provides twice the satisfaction of a market basket that provides 15 utils.
II. When economists first studied utility it was believed that utility was cardinal, but it was later discovered that ordinal preferences are sufficient to explain how most individual decisions are made.

• A) Both I and II are true.
• B) I is true, and II is false.
• C) I is false, and II is true.
• D) Both I and II are false.

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Definitions:

New Firms Enter

The process by which new companies start operations in a market, often increasing competition and innovation within the industry.

More Elastic

The term "More Elastic" describes a situation where the supply or demand for a good or service is more responsive to changes in price.

Monopolistically Competitive

Describes a market structure where many firms sell products that are similar but not identical, allowing for competition but also some degree of market power.

Economic Profits

Profits calculated after considering both explicit and implicit costs, representing the total opportunity costs.