Home » 5- Let’s say that you choose to buy bread in a grocery store. According to the marginal benefit and marginal cost principle, how many loaves of bread…

5- Let’s say that you choose to buy bread in a grocery store. According to the marginal benefit and marginal cost principle, how many loaves of bread…

5- Let’s say that you choose to buy bread in a grocery store. According to the marginal benefit and marginal cost principle, how many loaves of bread will you purchase if you know the following:

A loaf of bread costs $2.00. Each dollar is worth 50 utils to you (so $2 is worth 100 utils).

The first loaf of bread gives you 400 utils of satisfaction. The second loaf of bread gives you an additional 220 utils. The third loaf of bread gives you an additional 140 utils. The fourth loaf of bread gives you an additional 90 utils. The fifth loaf of bread gives you an additional 55 utils. The sixth loaf of bread gives you an additional 10 utils. The seventh loaf of bread gives you no more additional utils.

Four loaves.

One loaf.

Three loaves.

Two loaves.

Six loaves.

Five loaves.

seven loaves.

4- Let’s say that a business sells its product for a price that turns out to be far more than the equilibrium price. What will happen in the market for this product?

the higher price will result in a surplus of products for the firm. In order to eliminate the surplus, the firm will have to lower its price.

higher priced products provide a good reason for employees to demand higher wages. This will lead to higher profits for the firm.

since the price is above the equilibrium price, a shortage of the product will result.

the business is ensured of higher long term economic profits, because the price is probably lower than the cost of production.

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