Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes. Due to differences in caffeine levels, his MRS of tea for coffee equals two. If coffee and tea sell for the same price, Johnny will
A) spend all $30 on tea.
B) spend all $30 on coffee.
C) spend $20 on coffee and $10 on tea.
D) be indifferent between any bundle of coffee and tea costing $30.
B
You might also like to view...
In a two-good, two country world, if one country has a comparative advantage in the production of one good, it can benefit by trading with the other country
Indicate whether the statement is true or false
Sebastian drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.50 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Sebastian is rational in deciding how many cans to buy. His consumer surplus is
a. $0.50. b. $0.85. c. $1.05. d. $1.20.
Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?
What will be an ideal response?
The primary function of the International Finance Corporation (IFC) is to:
A. provide U.S. surplus food to low-income countries. B. provide short-term loans to poor countries to finance international trade deficits. C. make infrastructure loans, that is, loans for highways, schools, communication facilities, and so forth. D. make loans to private enterprises in the DVCs.