Suppose that MUx/Px exceeds MUy/Py. To maximize utility the consumer who is spending all her money income should buy:
A) less of X only if its price rises.
B) more of Y only if its price rises.
C) more of Y and less of X.
D) more of X and less of Y.
Ans: D) more of X and less of Y.
You might also like to view...
People tend to "dress up" for job interviews, even though their clothes do not make them more productive in their positions. This situation is an example of
a. signaling. b. adverse selection. c. the principal-agent problem. d. moral hazard.
In monopolistic competition:
a. firms collude with each other and act interdependently. b. there are substantial entry barriers. c. there are many close substitutes for the products offered by each firm. d. there are a few sellers each offering a unique product.
The Federal Deposit Insurance Corporation:
A. has eliminated bank failures. B. insures all demand deposits without limit. C. insures all demand deposits up to $250,000. D. includes commercial banks and state-chartered banks as its members.
Suppose consumers of cigarettes can be classified into two groups: heavy users and light users. Heavy users purchase more cigarettes and are less sensitive to price changes relative to light users. To determine whether a heavy user suffers a greater loss of consumer surplus than a light user does when the price of cigarettes increases, one would need to know
A) each group's average income. B) the actual quantities purchased by each. C) each individual's price elasticity of demand. D) no additional information.