Exhibit 6-3 2 1 Units Total Utility Units . Total Utility Offer to Exhibit 6-3.

Question

Exhibit 6-3 2 1 Units Total Utility Units . Total Utility Offer to Exhibit 6-3. Linda spends SS a week on apples and oranges. If the price of both goods is $1 per unit. les and oranges, respectively, does she purchase per week if she wants to maximize her utility? 5g :4 . o n2 ly 7ra b.land4 e, none of the above Costs are always explicit, never implicit. Costs are always implicit, never explicit. George runs a stationery shop, he paid Frank SS000 for the carpet he installed in the shop. The $5,000 for carpet is an implicit cost. An implicit cost is a which no actual monetary payment is made. none of the above a e. d. s the value of resources used in production for e,

Explanation / Answer

Price of both goods is $1 per unit (given). Therefore price ration =P1/P2 =$1

Now, Utility maximisation condition is when ratio of marginal utilities = ratio of prices,

MU1/MU2 = P1/P2

And this happens when Linda consumes 1 unit of apple and 4 units of oranges ,then ratio of marginal utilities also equal to 1.

Therefore, option(b) is correct .[ 1 apple and 4 oranges ].

The statement which is true is that An implicit cost is a cost that represents the value of resources used in production for which no actual monetary payments is made. Therefore, option(d) is correct.

APPLES ORANGES Units Total utility Marginal utility Units Total utility Marginal utility 0 0 - 0 0 - 1 15 15 1 22 22 2 28 13 2 41 19 3 39 11 3 58 17 4 48 9 4 73 15 5 55 7 5 85 12

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