Author Question: Refer to Figure 2-10. If the economy is currently producing at point E, what is the opportunity cost ... (Read 100 times)

maegan_martin · **on:** Jun 29, 2018

Refer to Figure 2-10. If the economy is currently producing at point E, what is the opportunity cost of moving to point D?

A) 16 thousand spoons B) 26 thousand forks
C) 20 thousand forks D) 0 spoons

Question 2

Kylie spends her income of 150 per week on two goods: movies (which cost 5 each) and books (which cost 10 each).

At her current level of consumption, the marginal utility from the last movie consumed is 20 and the marginal utility from the last book consumed is 30 . Is Kylie maximizing her utility? Why or why not? If not, what should Kylie do to achieve a higher level of utility?

Gabe · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

A

Answer to Question 2

No, she is not maximizing utility. She should be consuming such that the marginal utility per dollar spent on movies is equal to the marginal utility per dollar spent on books. In this case, the marginal utility per dollar spent on movies is higher. Therefore, she should increase her consumption of movies and lower her consumption of books.