The following combinations of goods X and Y represent various market baskets. Consumption is measured in pounds per month
Market Basket Units of X Units of Y
A 4 6
B 16 7
C 15 3
D 3 2
Explain which market basket(s) is(are) preferred to other(s), and if there is any uncertainty over which is preferable, point this out as well.
Since more of each good is preferred to less, we can conclude that a market basket is preferred to an alternative basket if it lies above and to the right of the alternative basket.
Combination B is preferred to all others. A and C cannot be compared without additional information. A and C are both preferred over D.
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Price discrimination by a firm is
a. illegal under all circumstances. b. legal if the firm can show that the difference in the prices charged customers is justified by a difference in the costs of serving them. c. legal if the firm can show that the demand for its good is relatively elastic. d. legal under all circumstances.
If a college admits only a fixed number of applicants every year, then the school's supply curve for admissions is:
A. Perfectly elastic B. Perfectly inelastic C. Quite flat D. Downward-sloping