Answer:
(c) MUa/Pa = MUb/Pb
Explanation:
The Utility Maximization Rule is
MUa/Pa = MUb/Pb, where MUa represents the marginal utility derived from good a, Pa represents the price of good a, MUb represents the marginal utility of good b and Pb represents the price of good b.
Answer:
d) Avoidable costs are also known as sunk costs.
Explanation:
The avoidable cost are those cost that can be ignored while making decision. The sunk costs are all those cost which already been incurred and it will not be effected by the change in decision. The sunk costs are already been expensed so, whatever decision you make it will not be changed.
Answer:
a.The rental of any ski equipment you need.
b.The cost of a lift ticket.
d. The wages you forgo by going skiing.
Explanation:
The true cost in this case can also be called the opportunity cost of going skiing and it is defined as the total cost required in order to achieve the aim of going skiing.
The rental of any ski equipment you need, the cost of a lift ticket and the wages you forgo by going skiing are all included in the true cost of going skiing.
Answer:
For b = 16 and h = 2, Miss Quested will get the maximum utility
Explanation:
Total income = $24
Price of bread = $1 per unit
Price of housing = $4 per unit
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Constraint on Income: b + 4*h = 24
Maximizing U(b,h) = 2*(b)^(0.5) + h = 2*b^0.5 + (6 - b/4)
To calculate maximum utility, we solve for b for which
1. derivate of function = 0
2. double derivate = negative (< 0)
Step 1: Derivate = 0 => d(U)/db = 2*(1/2)*b^(-0.5) - 1/4 = 0
=> 1/b = (-1/4)^2 = 1/16
Step 2: Double Derivate < 0 => d2(U)/db^2 = (-0.5)*b^(-1.5) = Negative !
