Larry spends all his $800 monthly income on pizza and gasoline. The price of pizza is $4 a slice, and the price of gasoline is $2 per gallon
If Larry buys 150 slices of pizza per month, his budget constraint will allow him to buy ________ gallons of gas per month. A) 100
B) 80
C) 120
D) 200
A
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Lisa is buying bread and at her current purchases, the marginal utility (in dollars) is less than price. If she wants to optimize, she should
A. reduce bread consumption, thus raising P to the level at which MU = P. B. reduce bread consumption, thus raising MU to the level at which MU = P. C. increase bread consumption, thus raising P to the level at which MU = P. D. increase bread consumption, thus lowering MU to the level at which MU = P.
During the recession phase of the business cycle, households become pessimistic about their future earning capacity as do banks. Nominal interest rates fall during recessions. Mortgage lending could be expected to
A) rise if the change in future earnings is thought to be greater than the change in interest payments. B) stay the same. C) fall. D) fall if the change in future earnings is thought to be greater than the change in interest payments.
The price effect describes the:
A. decrease in the quantity of labor supplied in response to a higher wage. B. increase in the quantity of labor supplied in response to a lower wage. C. increase in the quantity of labor supplied in response to a higher wage. D. increase in the quantity of labor demanded in respond to a higher wage.
If a tripling of price triples the quantity of a good supplied, the price elasticity of supply for this good is
a. 3 b. 300 c. 1 d. –1 e. –3