The Statement "Households Maximize Utility" Means That Households

question 2

Multiple Choice

The statement "Households maximize utility" means that households

• A)try to be as useful as possible to the economy
• B)are only interested in maximizing their earnings
• C)are assumed to buy useful things before they buy luxuries
• D)are only interested in acquiring material wealth
• E)are assumed to do what they think will increase their satisfaction

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Definitions:

Short-Run Supply Curve

A graphical representation showing the quantity of goods that producers are willing and able to sell at different prices over a short period of time, during which at least one of the firm's inputs is fixed.

Diminishing Marginal Returns

A principle in economics where increasing one factor of production, while keeping others constant, will yield lower additional output.

Price Ceiling

A legal maximum price that can be charged for a good or service, typically set by government to protect consumers.

Demand Curve

An image that graphically shows the relationship between an item's selling price and the quantities that consumers are interested in buying.