Question

Question 9 1 pts Logan Roy is spending all his money income by buying mineral water and popcorn. At his current consumption level, the marginal utility of mineral water is 70 and the marginal utility of popcorn is 60. The price of a bottle of mineral water is $2.00 and the price of a box of popcorn is $1.50. The utility-maximizing rule suggests that Logan should: O Increase consumption of popcorn and increase consumption of mineral water Decrease consumption of popcorn and increase consumption of mineral water Make no change in the consumption of mineral water or popcorn Increase consumption of popcorn and decrease consumption of mineral water Question 10 1 pts Faruq spends all his income on two goods tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The slope of Faruq's budget line is equal to: 0 -1/10 0-10 0 -1/5

Answer 1

1 - Option D

Increase consumption of pop corn and decrease consumption of mineral water.

This will increase MU of water and decrease MU of popcorn. Hence equilibrium condition will be established. Raising consumption of water will further decrease its MU which will not reach equilibrium. Hence option D will be correct.

2 - Option A

-5

Slope = -10/2

= (-5)

3 - Option C

40

This will happen when no units of Y are purchased.

X = 200/5

= 40

4 - Option C

16

Budget left for good Y = 160

Price of Y = $ 10

Quantity = 160/10

= 16 units

5 - Option B

E to F

Fall in price of chips will increase purchasing power of chips. Hence on X axis , budget line will shift right which means it will shift from E to F and not from F to E. The line on Y axis will not change

6 - Option C

Buy more of good A and less of good B

This is because his real income for good A will rise and hence he will buy more of good A and ultimately good B will fall.

7 - Option C

Same indifference curve

This curve represents combination of two goods which represent same level of satiafaction. Budget line and demand curve do not represent the satisfaction. Hence option C will be correct.