Colin spends his income of $100 per week on two goods: pizzas (which cost $8 each) and milk (which costs $1 per gallon)
At his current level of consumption, the marginal utility from the last pizza consumed is 32 and the marginal utility from the last gallon of milk is 4 . Is Colin maximizing his utility? Why or why not? If not, what should Colin do to achieve a higher level of utility?
Yes, he is maximizing utility. He is consuming such that the marginal utility per dollar spent on pizza is equal to the marginal utility per dollar spent on milk.
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Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A
A) has a lower opportunity cost of producing good X than has B. B) has a lower opportunity cost of producing good X than of producing good Y. C) can produce more units of X in a given time period than can B. D) can produce X using newer technology than can B.
Which of the following options would be most likely to cause an increase in short-term real interest rates?
a. The Federal Reserve cuts the discount rate. b. The Federal Reserve lowers the reserve requirement. c. The Federal Reserve sells bonds in the open market. d. The federal budget is shifted toward a surplus.