Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are
$.60 per bottle and $.40 per bag respectively. It can be concluded that:
A. the two commodities are substitute goods.
B. Mrs. Arnold should spend more on pretzels and less on soda.
C. Mrs. Arnold should spend more on soda and less on pretzels.
D. Mrs. Arnold is buying soda and pretzels in the utility-maximizing amounts.
Answer: C
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Refer to Figure 15-7. Suppose the Fed sells Treasury Bills in pursuit of contractionary monetary policy. Using the static AD-AS model in the figure above, this situation would be depicted as a movement from
A) B to C. B) B to D. C) C to B. D) C to D. E) A to B.
Private goods ____ rival ____ excludable
a. Are, and are b. Are, but are not c. Are not, but are d. Are not, and are not
The theory of purchasing power parity:
A. contradicts the law of one price. B. extends the law of one price to a basket of goods. C. explains exchange rate movements in the short run, while the law of one price explains exchange rate movements over the long run. D. assumes away inflation to have any validity.
Experience ratings provide firms with an incentive not to:
A. hire older workers. B. invest in health and safety programs. C. hire disabled workers. D. both hire older workers and hire disabled workers