The budget line shows: the different combinations of two goods that a consumer c

Question

The budget line shows: the different combinations of two goods that a consumer can buy. The quantity of a single good that a consumer is willing to buy at different prices. the maximized utility from a good. None of the above. For the consumer whose preferences are depicted, the marginal utility of the fifth movie is: The marginal utility of the first book is: The effect of the law of diminishing marginal utility is seen after: the fifth movie and the second book. the eighth movie and eighth book. the first movie and the first book. None of the above; this is a case where the law does not apply.

Explanation / Answer

Answers

1. A)

budget line shows the different combinations of two goods that a consumer can buy out of his given income and given the prices of two goods

2. B)

marginal utility is the change in total utility with increased consumption.thus marginal utility of fifth movie is = total utility of 5 th movie - total utility of 4 th movie

= 116-110

= 6

3. B)

marginal utility of first book= total utility of 1 book -total utility of 0 book

= 22-0

=22

4. C)

it is seen after first unit consumption of both book n movie, because as the consumption of a product increases the marginal utility tends to diminish as clear in table below

3

quantity total utility (movie) marginal utility total utility (book) marginal utility 1 50 50 22 22 2 80 30 42 20 3 100 20 52 10 4 110 10 57 5 5 116 6 60

3

6 121 5 62 2 7 123 2 63 1

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