Tyrell has $50 per week to spend on good A, which has a price of $5, and good B, which has a price of $4 . He buys six units of A and five of B. The marginal utility of the sixth unit of A is 25, and the marginal utility of the fifth unit of B is 20 . Which of the following is true?
a. He is maximizing his utility.
b. We cannot tell if he is maximizing his utility unless we know his total utility.
c. He is not maximizing his utility and should buy more of A.
d. He is not maximizing his utility and should buy more of B.
e. He is not maximizing his utility because he is not spending all of his income.
A
You might also like to view...
People eat at restaurants less often when their incomes fall because of a recession. Eating at restaurants must be
A) an inferior good. B) a normal good. C) a complement to other goods. D) a substitute for other goods. E) an inelastic good.
Suppose an economy has the following characteristics: 100 people in the noninstitutional population; 60 people employed; 20 people not in the labor force. How many people are in the economy's labor force?
A) 20 B) 40 C) 60 D) 80 E) 100
If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost of $8 and they are paying the profit-maximizing wholesale price of $20, what is the retail price of the product?
A) $12 B) $28 C) $8 D) $20
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.