Author Question: Tom spends all his income on comics and cola and maximizes his total utility. If the price of a ... (Read 30 times)

cookcarl · **on:** Jun 29, 2018

Tom spends all his income on comics and cola and maximizes his total utility. If the price of a comic is 4 and the price of a can of cola is 1, then the ratio of the ________ is 4.

A) marginal utility from cola to the marginal utility from comics
B) marginal utility from comics to the marginal utility from cola
C) number of comics Tom buys to the number of cola Tom buys
D) total utility from comics to the total utility from cola

Question 2

Stan, who is risk averse, can invest in project A or project B. Project A returns 3,000 with probability 1/2 and 9,000 with probability 1/2. Project B returns nothing with probability 1/2 and 12,000 with probability 1/2. For Stan, project A has

A) greater expected wealth and greater expected utility than project B.
B) lower expected wealth and lower expected utility than project B.
C) the same expected wealth and the same expected utility as project B.
D) the same expected wealth but higher expected utility than project B.