7. The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per b

Question

7. The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You have S10 to spend on both goods. The maximum number of boxes of popcorn that you can purchase is: A) 5. B) 10. C) 20. D) 40. 8. Tori devotes all of her income to the consumption of peanut butter and jelly. She has just discovered that at her eutrent level of consumption the marginal utility of a jar of peanut butter is 5 and the marginal utility of a jar of jelly is 7. Which of the following statements is TRUE? A) To maximize her total utility, Tori should consume more of both goods. B) To maximize her total utility, Tori should consume less of both goods. C) To maximize her total utility, Tori should consume more peanut butter and less jelly There is not enough information provided to justify a change in Tori's level of consumption. D) 9. John consumes pizza and pasta, both normal goods. He is maximizing his utility in consumption of both goods. The price of pasta rises. Assuming that diminishing marginal utility applies to both goods, as he adjusts to this event, the marginal utility of pizza will--, and the marginal utility of pasta will . A) rise; rise B) fall; fall C) fall; rise D) rise; fall 10. Paolo owns a pizza shop. The price of pizza recently increased from $3 to S5 a slice. Paolo responded by increasing the quantity of slices he supplied from 100 to 150 slices per day. By the midpoint method, Paolo's price elasticity of supply is: A) 1.25. B) 0.8. C) 0.75 D) 2.5 competition. A) True B) False

Explanation / Answer

11. Option A

Advertising is more likely to occur in perfect competition than in monopolistic because the goods in perfect competition is not differentiated. In perfect competitive markets the consumers get the knowledge of a particular product through advertising by the firm since the same product is sold by many other firms.

10.

Option A

The price elasticity of supply = % change in quantity supplied / % change in price.

=50/2 = 25

9.

Option B

The law of diminishing marginal utility is a law of economics stating that as a person increases consumption of a product while keeping consumption of other products constant, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

8.

Option D

Not enough info is given

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