Question

If Ed chooses a combination of goods and services that maximize his utility, then

a. Ed’s indifference curve intersects his budget line.

b. Ed’s indifference curve lies above his budget line.

c. Ed’s indifference curve slopes upward

d. Ed’s indifference curve is tangent to his budget line

e. Ed needs to get a life

To minimize costs for a given level of service, a hospital should

a. Set marginal revenue equal to marginal cost

b. Attain its highest indifference curve

c. Provide a level of service such that its isocost and isoquant curves are tangent

d. Provide a level of service such that consumer surplus is maximized

e. None of the above

If total revenue equals 100 when output is 10 and total revenue increases to 400 when output increase to 15, ten marginal revenue is

a. 300

b. 50

c. 40

d. 400/15

e. 20

Under a monopoly market structure

a. Consumer surplus is maximized.

b. Producer surplus is maximized.

c. Producer surplus is minimized.

d. Consumer surplus is negative

e. None of the above

A new medical treatment has a cost of $50,000 and saves 5 lives. The existing standard of care costs $30,000 and saves 1 life. What is the cost per life saved of the new treatment?

a. $15,000

b. $7,000

c. $10,000

d. $5,000

e. $3,000.

Answer 1

Q1 Answer is D.

When indifference gets tangent to budget line this will give maximum satisfaction.

Q2 Answer is C.

For cost best situation is when isoquant line is tangent to isocost line because isocost line represents minimum possible combinations of costs to produce different quantities of goods

Q3 Answer is A. 300

Marginal revenue is change in total revenue. Here marginal revenue = 400 - 100 = 300.

Q4 Answer is B. Producer surplus maximised

Because in monopoly firm charges higher prices then other market structures like perfect competition or oligopoly.

Q5 Answer is C. $10000

Per life cost = total cost / total life saved

= 50000/5 = 10000

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