Question

Italian Sub Italian Sub Taco Taco Taco Quantity MU MU MU/$4 10 MU/$2 15 MU/$1 30 40 30 2 32 8 24 12 8 24 16 3 20 16 12 - 12 - 5 3 1.5 0.5 5 6 6 2 8 4 6 4 2 12 8 4 - Refer to the table, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos. Assume that the price of a sub sandwich is $4 and the price of a taco is $2. When Harry's income is $14 he buys two Italian sub sandwiches and three tacos. The last column lists the values of the marginal utility per dollar for tacos when the price of a taco decreases to $1. Complete this statement: As a result of the change in price, the marginal utility of each taco Harry consumes increases and Finance Calculator https://www.calculator.net/finance- calculator.html O A. the substitution effect of the price change wil. Vuuwaung wuy viv luuuu .. they are a normal good, and fewer tacos if they are an inferior good. O B. the substitution effect will cause Harry to buy fewer tacos. O C. the substitution effect of the price change will cause Harry to buy more tacos and fewer subs. OD. the substitution effect will cause Harry to buy another sub because his purchasing power has increased.

Answer 1

1> C is correct

As it can be seen the Taco has a lower price now. So, he gets higher marginal utility/price. So, it makes sense to buy more tacos than before.

2> A $20

The seller receives a revenue per product of price of the product minus the tax on it. So, it is $20.

3> C is correct.

For each price, the points on the demand curve maximizes utility.