Problem 2
Frank spends 75 dollar on 10 magazines and 25 newspapers. The magazines cost \(\$ 5\) each and the newspapers cost \(\$ 2.50\) each. Suppose that his \(M U\) from the final magazine is 10 utils while his MU from the final newspaper is also 10 utils. According to the utility-maximizing rule, Frank should: a. Reallocate spending from magazines to newspapers. b. Reallocate spending from newspapers to magazines. c. Be satisfied because he is already maximizing his total utility. d. None of the above.
Problem 3
Demand curves slope downward because, other things held equal, a. An increase in a product's price lowers MU. b. A decrease in a product's price lowers MU. c. A decrease in a product's price raises \(M U\) per dollar and makes consumers wish to purchase more units. d. An increase in a product's price raises \(M U\) per dollar and makes consumers wish to purchase more units.
Problem 4
Jermaine spends his money on cucumbers and lettuce. If the price of cucumbers falls, the MU per dollar of cucumbers will _________ and Jermaine will __________ cucumbers for lettuce. LO7.4 a. Fall; substitute b. Rise; substitute c. Fall; supply d. Rise; demand
Problem 5
Tammy spends her money on lemonade and iced tea. If the price of lemonade falls, it is as though her income ____________ . a. Increases. b. Decreases. c. Stays the same.
