Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy will buy
A) more cookies and less hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate.
B) more cookies and less hot chocolate, which increases his marginal utility from cookies and decrease his marginal utility from hot chocolate.
C) fewer cookies and more hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate.
D) fewer cookies and more hot chocolate, which increases his marginal utility from cookies and decreases his marginal utility from hot chocolate.
D
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Refer to the figure above. What is the consumer surplus when Lithasia opens up to free trade?
A) $155 B) $215 C) $245 D) $325
The price elasticity of supply is 0.6. This means that
A) a $10 increase in price would increase quantity supplied by 60. B) a 150 percent increase in price would increase quantity supplied by 90 percent. C) a 50 percent increase in quantity will occur when price increases by 30 percent. D) a 10 percent increase in quantity will occur when price increases by 6 percent.