Question

Marginal Utility 12 Refer to the above diagram. The marginal utility of the third unit of X is: DAS. B. 4. C. 2 D. 1. 13. Ben is exhausting his money income consuming products A and B in such quantities that MUJP.-Sand MUP. - 8. Ben should purchase: A. more of A and less of B. B. more of both A and B. C. more of B and less of A. D. less of both A and B. Answer the next question(s) on the basis of the following two schedules which show the amounts of additional satisfaction (marginal utility) which a consumer would get from successive quantities of products and K. os 2.4 Units Units of JMU of K MU. 37 156 1 32 14 2 48 2 28 3 323 24 4 24 4 20 6 12 27 14 VA Refer to the above data. If the consumer has a money income of 552 and the prices of Jand Kare 58 and 54 respectively, the consumer will maximize her utility by purchasing: A. 2 units of J and 7 units of K. B. 5 units of J and 5 units of K. C. 4 units of Jand 5 units of K. D. 6 units of J and 3 units of K. 11

Answer 1

12. Ans: B ) 4

13. Ans: C ) more of B and less of A.

14. Ans: C ) 4 units of J and 5 units of K.

Explanation:

Units of J	MUJ	MUJ/ PJ	Units of K	MUK	MUK/ PK
1	56	7	1	32	8
2	48	6	2	28	7
3	32	4	3	24	6
4	24	3	4	20	5
5	20	2.5	5	12	3
6	16	2	6	10	2.5
7	12	1.5	7	8	2

Equilibrium condition is where ;

• MU_J / P_J = MU_K / P_K
• Entire given income or budget must be spend on these goods.

Y = P_J * Q_J + P_K * Q_K

$52 = $8 *4 + $4 * 5