Julio receives utility from consuming food (F) and clothing (C) as given by the
ID: 1219016 • Letter: J
Question
Julio receives utility from consuming food (F) and clothing (C) as given by the utility function U(F,C) = FC. In addition, the price of food is $5 per unit the price of clothing is $7 per unit and Julio's weekly income is $50. What is Julio's marginal rate of substitution of food for clothing when utility is maximized? Explain. Julio's marginal rate of substitution equals A. 0.71, which is the price of clothing divided by the price of food. B. 1.40, which is Julio's level of satisfaction. C. 1.40, which is (minus) the slope of the budget line. D- 1.40, which is the price of clothing divided by the price of food. E. 0.71, which is the price of food divided by the price of clothing.Explanation / Answer
Ans: D
Explanation:
MRSCF= MUC/MUF = PC/PF = 7/5 = 1.40
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.