According to the Theory of Utility Maximization

question 154

Multiple Choice

According to the theory of utility maximization,

• A) people who buy tap water apparently feel the additional benefit (compared with bottled water) offsets the additional cost
• B) people who buy bottled water apparently feel the additional benefit (compared with tap water) offsets the additional cost
• C) the marginal utility of the last gallon of bottled water consumed exceeds the marginal utility of the first gallon of tap water consumed
• D) the marginal utility of bottled water exceeds the marginal utility of diamonds
• E) bottled water must be more expensive (per gallon) than tap water

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Definitions:

Real Wage

The purchasing power of wages, considering the effect of inflation, representing the quantity of goods and services that can be bought with those wages.

Demand-Enhancing Union

A labor union strategy aimed at increasing demand for the products and services produced by its members.

Wage Rate

The standard amount of compensation received by a worker per unit of time (hour, day, etc.) for their labor.

Labor Productivity

A measure of economic performance that calculates the amount of goods and services produced per unit of labor.