Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are
$.60 per bottle and $.40 per bag respectively. It can be concluded that:
A. the two commodities are substitute goods.
B. Mrs. Arnold should spend more on pretzels and less on soda.
C. Mrs. Arnold should spend more on soda and less on pretzels.
D. Mrs. Arnold is buying soda and pretzels in the utility-maximizing amounts.
Answer: C
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A falling price level in conjunction with rising output would be evidence in favor of which model?
a. Keynesian model. b. monetarist model. c. real business cycle model. d. a and b. e. none of the above.
In the long run, changing technology on average has led to: a. lower employment and lower wage rates
b. higher employment and lower wage rates. c. lower employment with wage rates unchanged. d. higher employment with wage rates unchanged. e. higher incomes and more leisure time.