Use the Law of Diminishing Marginal Utility to Explain Why

question 57

Essay

Use the law of diminishing marginal utility to explain why a pizza parlor might price pizzas in the following way: "Buy one pizza for $12,get the second pizza for $6." Why not simply charge $9 per pizza instead?

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Definitions:

Operating Assets

Assets that are used in the day-to-day operations of a business to generate revenue, such as machinery, buildings, and equipment.

Minimum Required Rate

The lowest return on investment that an investor is willing to accept, often influenced by the risk-free rate and the investor's risk tolerance.

Net Operating Income

The profit from a company's operations after subtracting operating expenses from gross income.

Operating Assets

Assets utilized in the day-to-day operations of a business to generate revenue, including machinery, buildings, and equipment.