Suppose that an individual consumes just two goods: Big Macs and milkshakes. In order to reach consumer equilibrium, the individual must arrange the consumption of Big Macs and milkshakes so that the:
a. marginal utility of the two goods is equal for the last dollar spent on each good.
b. ratio of marginal utility to price is the same for both goods for the last dollar spent on each good.
c. ratio of marginal utility of milkshakes to the marginal utility of Big Macs is 1 for the last dollar spent on each good.
d. price paid for the two goods is the same.
b
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Assume a country is in a fixed exchange rate regime. Now suppose that individuals expect that policy makers will revalue its currency. Explain the various actions that policy makers can choose in response to this expected revaluation
What will be an ideal response?
Refer to the graph below for a purely competitive firm in the short run. The price of the firm's product is given by:
A. 0F/0C
B. 0G/0C
C. 0F/0B
D. 0E/0A