Asked by Alexandra Kostanyan on Jul 26, 2024
Verified
If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ Pc = 100/?, the prices of products B and C in consumer equilibrium
A) cannot be determined from the information given.
B) are $10.5 and $15, respectively.
C) are $12 and $20, respectively.
D) are $15 and $10.5, respectively.
Consumer Equilibrium
In marginal utility theory, the combination of goods purchased that maximizes total utility by applying the utility-maximizing rule.
Prices
The amount of money required to purchase a good or service, often determined by the forces of supply and demand in the market.
- Learn how the selection of ideal combinations of items under budgetary constraints leads to the maximization of utility.
- Examine the relationship among total utility, marginal utility, and the condition of consumer equilibrium.
Verified Answer
DF
David FeynbergAug 01, 2024
Final Answer :
B
Explanation :
The correct prices of products B and C can be determined using the given marginal utilities (MU) and prices. The formula for consumer equilibrium is MUa/Pa = MUb/Pb = MUc/Pc. Given MUa/Pa = 20/$3, MUb = 70, and MUc = 100, we can solve for Pb and Pc. For product B, 20/$3 = 70/Pb, solving for Pb gives $10.5. For product C, 20/$3 = 100/Pc, solving for Pc gives $15. Therefore, the prices of products B and C are $10.5 and $15, respectively.
Learning Objectives
- Learn how the selection of ideal combinations of items under budgetary constraints leads to the maximization of utility.
- Examine the relationship among total utility, marginal utility, and the condition of consumer equilibrium.
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