Question

plz all the question and how and why was it solve this way thanks a lot

Refer to the following information for questions 17 - 19. Lilly's current marginal utility from consuming tea (MUT) is 50 utils per ounce and her marginal utility from consuming coffee (MUC) is 60 utils per ounce. If tea costs (P1) $0.25 per ounce and Coffee costs (Pc) $0.30 per ounce, 17. What is Lilly's utility per dollar spent on tea (MUT/Pr)? A. 100 B. 200 C. 250 D.O 18. What is Lilly's utility per dollar spent on coffee (MU/Pc)? A. 200 B. 250 C.O D. 300 19. Is Lilly maximizing her utility? A. No B. Yes C. Depends on her income D. Cannot be determined 20. Which of the following distinguishes monopolistic competition from perfect competition? A. Large number of sellers B. Free entry or exit of firms in the long run C. Product differentiation D. Large number of buyers

Answer 1

17. B. 200

Lilly's utility per dollar spent on tea = MU_T / P_T = 50 / 0.25 = 200

18. A. 200

Lilly's utility per dollar spent on coffee = MU_C / P_C = 60 / 0.30 = 200

19. B. Yes

$Utility\: maximization\: condition: \frac{MU_{T}}{P_{T}} = \frac{MU_{C}}{P_{C}}$

(200 = 200) Yes, lilly is maximizing her utility.

20. C. Product differentiation

In monopolistic competition, there is product differentiation. The products are unique, attractive and distinguishes itself from other products in the market. Whereas, in perfect competition, firms sell homogeneous product.