Refer to Figure 21-4. Suppose the price of pears, the price of apples, and Steve

Question

Refer to Figure 21-4. Suppose the price of pears, the price of apples, and Steve's income remain constant, and Steve moves from point B to point C. In doing so, Steve becomes better off. moves from a point that is not optimal to a point that is optimal. gives up some apples to get some pears. All of the above are correct. Refer to Figure 21-4. Steve gains 1.1 pounds of pears and becomes better off by moving from point A to point B. gains 1.1 pounds of pears and becomes better off by moving from point A to point C. gains 1.1 pounds of pears and becomes better off by moving from point B to point C. gives up 1.1 pounds of pears and becomes better off by moving from point C to point B. Refer to Figure 21-4. If the price of a pound of pears is $3, then Steve's income is $12.00. $13.50. $16.20. $18.80.

Explanation / Answer

7. Option C is correct.

This is so because Steve is at point B having a 3 pears and 2 apples. Now moving to a point C where the bundle contains 4.1 pears and 0.6 apples, imply that his bundle now has more of pears, which he got by sacrificing apples.

8. Option D is correct.

This is bcause moving from point C to B implies moving from a lower indifference curve to a higher one which means that the consumer is being better off. The optimal condition requires that the indifference curve should be tangent at the budget line, which is at point B.

9. Option C is correct.

On the vertical axis, the maximum that Steve can buy is 5.4 pears with no apples. Given the price of pear is $3, then his income would be = 5.4*3 = $16.20

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