Tris is shopping for pants and belts. He has a budget of $100. The price of a pair of pants is $20 and the price of a belt is $5. His marginal utility schedules are above. What combination of pants and belts does Tris buy? Explain your answer
What will be an ideal response?
Tris buys 4 pairs of pants and 4 belts because this is the combination that allocates (spends) all of his budget and has the marginal utility per dollar from a pair of pants equal to the marginal utility per dollar from a belt. For the first requirement, that Tris allocate his entire budget, the combination of 4 pants and 4 belts spends (4 pairs of pants) × ($20 per pair of pants) = $80 on pants and (4 belts) × ($5 per belt) = $20 on belts, for a total spent of $100. For the second requirement, the equality of the marginal utilities per dollar, the marginal utility per dollar from a pair of pants is (100 units) ÷ ($20 ) = 5 units per dollar and the marginal utility per dollar from a belt is (25 units) ÷ ($5 ) = 5 units per dollar.
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The production possibilities frontier is the
A) maximum output that can be produced at an opportunity cost of zero. B) minimum output that can be produced when resources are used inefficiently. C) boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology. D) boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced when technology is changing. E) maximum opportunity cost combinations of goods and services.
Give three reasons why the U.S. economy is more stable since 1950
What will be an ideal response?
If firms do not increase their quantity supplied when price changes, then supply is
A) elastic. B) perfectly inelastic. C) relatively inelastic. D) perfectly elastic.
Suppose an increase in the demand for labor results in an increase of $4 per hour in the equilibrium wage. How does the increase in the demand for labor affect the value of the marginal product of labor (VMPL)?
a. The VMPL increases by less than $4. b. The VMPL increases by $4. c. The VMPL increases by more than $4. d. The VMPL decreases by $4.