Fact 9.3.1 Marc has an income of $20 and spends it on two goods, root beer (measured on the vertical axis) and chips (measured on the horizontal axis). The price of root beer is $1 a can. The price of chips is 50.50 a bag. Initially, Marc chooses to consume 10 cans of root beer and 20 bags of chips. Then the price of root beer rises to $1.50 per can and the price of chips falls to 50.25 a bag Refer to Fact 9.3.1. Marc's initial marginal rate of substitution was OA equal to 2 cans of root beer given up for each bag of chips gained. O equal to 10 cans of root beer given up for each bag of chips gained. OC not calculable with the information given. O equal to 1 can of root beer given up for each bag of chips gained. OE equal to 1/2 can of root beer given up for each bag of chips gained.
Fact 9.3.1 Marc has an income of $20 and spends it on two goods, root beer (measured on the vertical axis) and chips (measured on the horizontal axis). The price of root beer is $1 a can. The price of chips is 50.50 a bag. Initially, Marc chooses to consume 10 cans of root beer and 20 bags of chips. Then the price of root beer rises to $1.50 per can and the price of chips falls to 50.25 a bag Refer to Fact 9.3.1. Marc's initial marginal rate of substitution was OA equal to 2 cans of root beer given up for each bag of chips gained. O equal to 10 cans of root beer given up for each bag of chips gained. OC not calculable with the information given. O equal to 1 can of root beer given up for each bag of chips gained. OE equal to 1/2 can of root beer given up for each bag of chips gained.
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.15P
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Transcribed Image Text:Use the information below to answer the following questions.
Fact 9.3.1
Marc has an income of $20 and spends it on two goods, root beer (measured on the vertical axis) and chips (measured on
the horizontal axis). The price of root beer is $1 a can. The price of chips is $0.50 a bag. Initially, Marc chooses to consume
10 cans of root beer and 20 bags of chips. Then the price of root beer rises to $1.50 per can and the price of chips falls to
$0.25 a bag.
Refer to Fact 9.3.1. Mare's initial marginal rate of substitution was
OA equal to 2 cans of root beer given up for each bag of chips gained.
OB. equal to 10 cans of root beer given up for each bag of chips gained.
OC not calculable with the information given.
OD equal to 1 can of root beer given up for each bag of chips gained.
OE. equal to 1/2 can of root beer given up for each bag of chips gained.
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