At his utility maximizing bundle, Jim has marginal utility of 10 for beef snacks and marginal...
At his utility maximizing bundle, Jim has marginal utility of 10 for beef snacks and marginal utility of 30 for carrot juice. Which of the following is true?
Question 32 options:
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Homework Answers
Option 5 is correct answer
Marginal rate of substitution between beef snacks and carrot juice is the number of carrot juice given up for the additional unit of beef snack
therefore MRS=MU(beef stock)/MU(carrot juice)=10/30=1/3
Hence it means that we have to forgo 1/3rd of Carrot juice for additional unit of beef snack to maintain the same utility
Hence option 3 is not correct
At equilibrium MRS= Price ratio=1/3
Beef Snack Price/Carrot Juice Price=1/3
Carrot Juice Price=3* Beef Snack Price
Hence option 5) is correct
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