Author Question: The following combinations of goods X and Y represent various market baskets. Consumption is ... (Read 145 times)

SGallaher96 · **on:** Jul 1, 2018

The following combinations of goods X and Y represent various market baskets. Consumption is measured in pounds per month.

Market Basket Units of X Units of Y
A 4 6
B 16 7
C 15 3
D 3 2

Explain which market basket(s) is(are) preferred to other(s), and if there is any uncertainty over which is preferable, point this out as well.

Question 2

The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. What is the variable cost?

A) 200
B) 5Q
C) 5
D) 5 + (200/Q)
E) none of the above

sokh · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

Since more of each good is preferred to less, we can conclude that a market basket is preferred to an alternative basket if it lies above and to the right of the alternative basket.

Combination B is preferred to all others. A and C cannot be compared without additional information. A and C are both preferred over D.

Answer to Question 2

B