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liubo4ka [24]
3 years ago
11

Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MU A/P

A) is .6 and the marginal utility per dollar spent for good B (MU B/P B) is 1. To increase utility with the same amount of money, Paul should:
Business
1 answer:
Makovka662 [10]3 years ago
5 0

Answer: Increase the number of B consumed and decrease the number of A consumed.

Explanation: The utility maximization rule basically states that if the marginal utility gained from product A is greater than the marginal utility gained from product B, then more of product A should be consumed and less of product B should be consumed in order to maximize the utility per unit of money spent.

Therefore, in order for Paul to increase utility with the same amount of money, he should increase spending on the product that offers the higher marginal utility, meaning that he should spend more on the product that offers more satisfaction.

The product that offers more satisfaction in the scenario above is product B, because its marginal utility per dollar is 1, which is greater then the marginal utility of product a of 0.6 marginal utility per dollar.

Hence, Paul should increase consumption of product B and decrease consumption of product A.

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3 years ago
(Table: Cherry Farm) Use Table: Cherry Farm. If Hank and Helen have one of 100 farms in the perfectly competitive cherry industr
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Answer:

500

Explanation:

please find attached the table referred to in this question and a second table where marginal cost is included

A perfect competition is characterised by many buyers and sellers of homogeneous goods and services. Market prices are set by the forces of demand and supply.

in a perfect competition, price = marginal cost = marginal revenue

Marginal cost = total cost 2 - total cost 1

e.g. marginal cost at 2 units of output = $7 - $2 = $5

Hank and Helen would supply at the point  where marginal cost is equal to $5.

looking at the second attached table, there are two points where marginal cost is equal to $5. at output 1 and output 5.

at output one, Hank and Helen would be earning a loss because total cost is greater than total revenue. so they would not supply at this point.

at output five, Hank and Helen would earn a profit and thus would supply at 5 units of output.

Since all firms face and identical cost structure, the industry supply would be 100 x 5 = 500 pounds

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