The Fact That a Gallon of Gasoline Commands a Higher

question 148

Multiple Choice

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that

• A) gasoline is an economic good but water is not.
• B) the marginal utility of gasoline is greater than the marginal utility of a gallon of water.
• C) the average utility of a gallon of gasoline is greater than the average utility of a gallon of water.
• D) the total utility of gasoline exceeds the total utility of water.

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Definitions:

Economic Profits

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs.

Normal Profits

The level of profit that is necessary for a company to remain competitive in the market, often seen as the minimum acceptable return.

Short Run

Refers to a period in economics where certain inputs or resources are fixed and cannot be changed, contrasting with the long run where all factors are variable.

Long Run

A period in which all factors of production and costs are variable, allowing for adjustment to changes in the market or economy.