Pencils sell for 10 cents and pens sell for 50 cents. Suppose Jack, whose preferences satisfy all of the basic assumptions, buys 5 pens and one pencil each semester. With this consumption bundle, his MRS of pencils for pens is 3.
Which of the following is true? A) Jack could increase his utility by buying more pens and fewer pencils.
B) Jack could increase his utility by buying more pencils and fewer pens.
C) Jack could increase his utility by buying more pencils and more pens.
D) Jack could increase his utility by buying fewer pencils and fewer pens.
E) Jack is at a corner solution and is maximizing his utility.
Question 2
Which of the following is NOT an application of supply and demand analysis?
A) Understanding changing world economic conditions and their effects on prices
B) Evaluating the effects of government price controls on the agricultural industry
C) Determining how taxes affect aggregate consumption spending patterns
D) all of the above
E) none of the above
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