Leo consumes only apples and bananas. He prefers more apples to fewer, but he ge

Question

Leo consumes only apples and bananas. He prefers more apples to fewer, but he gets tired of bananas. If he consumes fewer than 24 bananas per week, he thinks that 1 banana is a perfect substitute for 1 apple. But you would have to pay him 1 apple for each banana beyond 24 that he consumes. The indifference curve that passes through the consumption bundle with 31 apples and 36 bananas also passes through the bundle with A apples and 18 bananas, where A equals

a)29
b)23
c)31
d)25
e)none of the above

Explanation / Answer

Since we are consuming 31 apples and 36 bananas, we are being paid apples to eat more than 24 bananas. We ate 12 more bananas than the 24, so we were paid 12 apples. This means we are indifferent between (31 apples and 36 bananas) and (19 apples and 24 bananas.) 19 is 31 we started with, minus the 12 we were paid. Now, bananas and apples are perfect substitutes so we have a utility of 19+24=43. Since we are eating 18 bananas, we need 25 apples to equal the same utility of 43. The answer is d, 25.

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