Elaine Values the Utility of Her First Cup of Coffee

question 44

Multiple Choice

Elaine values the utility of her first cup of coffee at $1; a second cup, $.75; and a third cup, $.50. If Elaine drinks three cups of coffee for breakfast, her marginal utility is equal to

• A) $.50, the value of her last cup of coffee.
• B) $1.00, the value of her first cup of coffee.
• C) $2.25.
• D) $1.50.

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Definitions:

Total Variable Costs

The summation of all costs that vary with the level of output, such as raw materials and labor costs, differing from fixed costs.

Total Fixed Costs

The sum of all costs required to produce any good or service, that do not change with the volume of production.

Average Variable Costs

The total variable expenses of producing an item, divided by the quantity of items produced, accounting for costs that change with the production volume.

AVC Curve

The Average Variable Cost curve, in economics, represents how the variable cost per unit changes with the level of output.