Frank is purchasing products C and D in utility-maximizing amounts. If the price of C is $4 and the price of D is $2, then:
A. the marginal utility of D is twice that of C.
B. the marginal utility of D is the same as that of C.
C. the marginal utility of C is twice that of D.
D. the marginal utility of C is four times that of D.
Answer: C
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When the price of milk rose 50 percent, the quantity of milk sold fell 25 percent and the sale of breakfast cereals also fell 25 percent. This set of facts indicates that the
A) demand for milk is price elastic. B) demand for breakfast cereals is price elastic. C) cross elasticity between milk and cereal is negative so the two are complements. D) cross elasticity between milk and cereal is positive so the two are complements.
A currency devaluation is a(n):
A. increase in the official value of a currency in a fixed-exchange-rate system. B. decrease in the value of a currency relative to other currencies. C. reduction in the official value of a currency in a fixed-exchange-rate system. D. increase in the value of a currency relative to other currencies.