Lisa consumes only pizzas and burritos. In equilibrium, her marginal utility of pizza is 20 and her marginal utility of a burrito is 10. The price of a pizza is $4. What is the price of a burrito?
What will be an ideal response?
In equilibrium, the ratio of the marginal utility of a pizza divided by the price of a pizza must equal the marginal utility of a burrito divided by the price of a burrito. Thus, the price of a burrito must be $2.
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Intuitively, the marginal rate of substitution for X with Y tells us:
A. how much Y a consumer needs to compensate them for a one-unit decrease in X. B. how much X must be taken away from a consumer to compensate them for a one-unit increase in Y. C. how much X a consumer needs to compensate them for a one-unit decrease in Y. D. how much more Y the consumer will buy if the price of Y increases by $1.
Which of the following is true of a common market?
A. There is free movement of capital and labor among the member countries. B. The member countries export similar products to the non-member countries. C. The member countries do not import goods from the non-member countries. D. The member countries have identical monetary and fiscal policies.