1. Utility

The study of utility is the basis of consumer theory. We studied both total utility and marginal utility

a. As was covered, total utility will always increase at what rate (increasing,

constant, or decreasing)? Explain why it increases at this rate.

b. The goal is to maximize the level of total utility. According to the Utility-

Maximizing Rule, how do we know when we have maximized total utility?

2. Long Run Status (12 points)

a. State the three regions of the long run average cost curve. Indicate what happens

to the cost and productivity in each region.