If the MPC = 0

question 9

Multiple Choice

If the MPC = 0.75 for a particular person this means that:

• A) they will spend 75 cents of each new dollar they get.
• B) if they receive $1 they want to spend roughly 75%, but probably won't do so.
• C) they will spend 25 cents of the $1 and save 75 cents.
• D) if they receive $1 then they want to spend 25% of it.

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Definitions:

Optimal Output

The level of production that maximizes a firm's profit, or the most efficient allocation of resources in producing a good or service.

Price to Clear

The price to clear is the market price at which the quantity supplied equals the quantity demanded, thereby clearing the market without leaving surplus or shortage.

Perfectly Competitive Industry

A Perfectly Competitive Industry is characterized by many sellers and buyers, free entry and exit, and a product that is identical across suppliers, leading to no single entity having market control.

Marginal Cost

The additional cost of producing one extra unit of a good or service.