Tom is maximizing utility by buying three packs of bubble gum and four packages of Skittles. Given diminishing marginal utility, if the price of Skittles rises, the principle of rational choice tells us that Tom will buy:
A. more Skittles, raising the opportunity cost of not consuming Skittles.
B. fewer Skittles, lowering the opportunity cost of not consuming Skittles.
C. fewer Skittles, raising the opportunity cost of not consuming Skittles.
D. more Skittles, lowering the opportunity cost of not consuming Skittles.
Answer: C
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Relative to free trade, domestic consumers of a good are ________ off with a tariff because of the ________
A) better; higher price and greater quantity sold B) better; higher price and smaller quantity sold C) better; lower price and greater quantity sold D) worse; lower price and smaller quantity sold E) worse; higher price and greater quantity sold
If two countries find that neither has a comparative advantage in the production of any good or service:
A) it must be true that one country produces everything more efficiently than the other country. B) each country will find it beneficial to trade. C) it is impossible for them to benefit from trade. D) they should still specialize and trade.