Answer:
Consumption of good y should decrease
The Marginal Utility should also decrease
Explanation:
Marginal utility of a good is the added satisfaction that a consumer gets from consuming additional units of the good.
Given the two goods x and y, and MUx/Px > MUy/Py.
The Marginal Utility Price Ratio indicates the Utility/Satisfaction derived from the last Dollars spent.
To allocate a budget efficiently, the marginal utility for each item should be equal.
A good has a higher marginal utility-price ratio is the good that the consumer should consume more of.
If the Marginal Utility-Price ratio of good x is greater than that of good y, your consumption of good y should decrease and therefore, the MUy will also decrease.
Answer:
D. A price that fits comfortably in your budget
Markets provide the efficient amount of a good or service when <span>externalities and public goods are absent.
Externalities in this case refers to an unpredictable occurence such as natural disasters, and public goods refers to the goods that given from the government for lower or higher than the market price</span>
Answer:
Cost of equity = 19.1
%
Explanation:
Cost of equity = required rate of return + flotation cost
The Capital assets pricing model would be used to determined the required rate of return
<em>The capital asset pricing model (CAPM): relates the price of a share to the market risk or systematic risk. The systematic risk is that which affects all the all the economic agents, e.g inflation, interest rate e.t.c </em>
Using the CAPM , the required rate of return is given as follows:
E(r)= Rf +β(Rm-Rf)
E(r) - required return
β- Beta
Rm- Return on market
Rf- Risk-free rate
DATA
E(r) =? , Rf- 3%, Rm-14% , β- 1.1, flotation cost - 4%
E(r) = 3% + 1.1× (14% - 3%) = 15.1
%
Cost of equity = required rate of return + flotation cost
= 15.1
% + 4% = 19.1
%
Cost of equity = 19.1
%
Answer: more; externality; market power.
Explanation:
Bakers are much (more) likely to supply pastries to the market if property rights are not enforced.
a. A manufacturing plant dumps chemical waste into a nearby river, poisoning the water supply for a small town downstream. - Externality
Externality, refers to the benefit s or costs that someone else incurs based on the economic decision of another person. In this case, this is a negative externality as the small town bears the cost of the production activities of the company.
b. A single public utilities company is responsible for supplying electricity for an entire state. As a result, the utilities company can set the price of electricity - Market power
Market power is when a firm is able to dictate the price and can then raise the price. This brings about the reduction in output as well. Since the single public utilities company is responsible for supplying electricity for an entire state, the company is enjoying monopoly power or market power.
