ECONOMICS
COST BENEFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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total utility of diamond rings is greater than the total utility of water
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total utility of water is less than the marginal utility of a diamond ring
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marginal utility of a bottle of water is less than the marginal utility of a diamond ring
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marginal utility of a bottle of water is greater than the marginal utility of a diamond ring
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consumer is irrational and does not understand that water is more important than a diamond
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Detailed explanation-1: -In economics, utility refers to the satisfaction gained from consuming a good or service. Total utility is usually defined as a quantifiable summation of satisfaction or happiness obtained from consuming multiple units of a particular good or service.
Detailed explanation-2: -Answer and Explanation: The answer is b. increasing opportunity cost/diminishing returns. The production possibilities curve is concave to the origin to show the increasing opportunity cost when producing a given commodity using a given combination of inputs, such as labor and capital.
Detailed explanation-3: -Diminishing marginal utility and the law of demand The law of diminishing marginal utility helps us understand the law of demand. Because consumers will derive less happiness or benefit from additional units of a good, they will only be willing to buy a larger quantity if the price decreases.
Detailed explanation-4: -The Production Possibilities Curve (PPC) is a model that captures scarcity and the opportunity costs of choices when faced with the possibility of producing two goods or services. Points on the interior of the PPC are inefficient, points on the PPC are efficient, and points beyond the PPC are unattainable.