Steve has two goods he can spend his income on, skiing and skating, and his marginal utilities from each are in the table above. The price of each unit of skiing is $10 and the price of each unit of skating is $5. Steve has $40 to spend
What quantities of skiing and skating should Steve consume to maximize his utility? A) 4 units of skiing and 4 units of skating
B) 2 units of skiing and 4 units of skating
C) 1 unit of skiing and 2 units of skating
D) 5 units of skiing and 5 units of skating
B
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Consider an economy with only two goods: bread and wine. In 1982, the typical family bought 4 loaves of bread at 50¢ per loaf and 2 bottles of wine for $9 per bottle. In Year X, bread cost 75¢ per loaf and wine cost $10 per bottle. The CPI for Year X (using a 1982 base year) is:
A. 100. B. 115. C. 126. D. 130.
When a positive externality is present in a market, total surplus is:
A. higher when buyers receive a Pigouvian subsidy for the externality. B. lower when buyers receive a Pigouvian subsidy for the externality. C. higher when buyers only consider private benefits. D. Any of these statements could be true.