For an individual who consumes only two goods, x andy, the opportunity cost of consuming one more unit ofx in terms of how much y must be given up is reflected by:

1. For an individual who consumes only two goods, x andy, the opportunity cost of consuming one more unit ofx in terms of how much y must be given up is reflected by:

	a.	the individual's marginal rate of substitution.
	b.	the market prices of x and y.
	c.	the slope of the individual's indifference curve.
	d.	none of the above.

2. Suppose an individual's MRS (of steak for beer) is 1:3. That is, at the current consumption choices he or she is willing to give up 3 steak to get an extra beer. Suppose also that the price of a steak is $1 and a beer is $4. Then in order to increase utility the individual should:

	a.	buy more beer and less steak.
	b.	continue with current consumption plans.
	c.	none of answers above.
	d.	buy more steak and less beer.

Solutions

Expert Solution


ans 1	Correct answer is option :
	the slope of the individual's indifference curve

ans 2	Correct answer is option :
	buy more beer and less steak.

ekkarill92 answered 2 years ago

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