Brandon receives a marginal utility of 5, 4, 3, 2, 1, and 0 from eating successive donuts. Successive cups of coffee provide him with 9, 8, 6, 4, 3, and 2 utils of marginal utility. Donuts cost 50 cents each, coffee costs 1 per cup, and Brandon has 3 to spend. Which of the following options will yield Brandon the greatest utility?
a. six donuts
b. four donuts and one cup of coffee
c. two donuts and two cups of coffee
d. four donuts and one cup of coffee
Question 2
If the ratio of marginal revenue product to marginal factor cost for labor is greater than that for capital, then:
a. the producer can maximize profit by hiring more units of capital.
b. the producer suffers losses by hiring more units of labor.
c. the producer does not alter the resource allocation.
d. the producer can maximize profit by hiring more units of labor.
e. the producer will earn above normal profit by hiring less units of labor.
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