Problems Chapter 4

Problems Chapter 4 - Chapter 4 Review Questions Problems...

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Chapter 4 Review Questions
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Problems 1.1 and 1.2 page 120 1.2 Why is the demand curve referred to as a marginal benefit curve? 1.2 Why is the supply curve referred to as a marginal cost curve?
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Answers 1.1 Marginal benefit is the additional benefit to a consumer from consuming one more unit of a good or service. The demand curve shows consumers’ willingness to pay for a product. The amount that they are willing to pay will equal the extra benefits they will receive from consuming it, thus the demand curve equals the marginal benefit curve for consumers. 1.2 Marginal cost is the additional cost to a firm of producing one more unit of a good or service. Supply curves show the willingness of firms to supply a product at different prices. The willingness to supply a product depends on the cost of producing it. The lowest price a firm is willing to accept is the additional cost of making the good, thus the supply curve equals the marginal cost curve.
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Problem 1.5 Page 120 Suppose that a frost in Florida reduces the size of the orange crop, which causes
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Problems Chapter 4 - Chapter 4 Review Questions Problems...

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