Adam Makes $25,000 Per Year and Bob Makes $45,000 a Year

question 209

Multiple Choice

Adam makes $25,000 per year and Bob makes $45,000 a year, and they both have the same marginal benefit curve. According to the utilitarian view, if a dollar is transferred from Bob to Adam, then

• A) the change in Adam's marginal benefit plus the change in Bob's marginal benefit is negative.
• B) Adam's marginal benefit increases by more than Bob's marginal benefit decreases.
• C) the change in Adam's marginal benefit plus the change in Bob's marginal benefit equals zero.
• D) Adam's marginal benefit decreases by more than Bob's marginal benefit increases.

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Definitions:

Marginal Cost

The cost of producing one additional unit of a product, calculated by the change in total cost divided by the change in quantity.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output within a business.

Vertical Distance AB

A measure of the difference in height between two points, A and B, often used in mathematics and physics to determine the direct vertical separation.

Average Total Cost Curve

A graphical representation illustrating the cost per unit of output, calculated by dividing the total cost by the quantity of output produced.