Assume that Sofia's marginal utility from pizza consumption is 10 utils and the price is 2.00 per slice. Further, assume that her marginal utility from scone consumption is 20 utils and the price is 3.00 per scone. Which of the following is true?
a. With her existing budget she should increase her consumption of pizza.
b. With her existing budget she should increase her consumption of scones.
c. She is currently maximizing her utility and should not change the amount of consumption for either good with her current budget.
d. If her budget increases, she should increase her consumption of pizza but not scones.
e. If her budget increases, she should increase her consumption of scones but not pizza.
Question 2
A firm under any market structure maximizes profits at a point where:
a. marginal revenue product is greater than marginal factor cost.
b. marginal revenue product is equal to marginal factor cost.
c. marginal revenue product is equal to zero.
d. marginal factor cost is equal to zero.
e. marginal revenue product is less than marginal factor cost.
A graphical representation of the marginal value theorem.
Alan Price - Poor People
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