Question

Which of the following is true when the price of a good is zero?

Select one:

a. A consumer will consume the entire amount of the good available in the market.

b. A consumer will consume an infinite quantity of the good as the good is available free of cost.

c. A consumer will consume additional units of the good as long as marginal utility is positive.

d. A consumer will consume until total utility derived from consumption becomes zero.

e. A consumer will consume additional units of the good as long as the ratio of total utility to price is positive.

Which of the following statements is true?

Select one:

a. The money price is usually more for high-wage workers than for low-wage workers.

b. The time price of a good is directly proportional to the money price.

c. The time price is usually less for low-wage workers than for high-wage workers.

d. The money price is always more than the time price.

e. The money price of a good is usually the same as the time price for most consumers.

Answer 1

Ans of 1st Ques)- When The Price of good is zero, Then

c) A consumer will consume additional units of the good as long as marginal utility is positive.

So, option 'C' is correct because According to consumer behaviour, a consumer consumes the additional units of the good as long as marginal utility is greater than the price of good. i.e. as long as MU>P , and here price is '0' So, a consumer will consumer as long as MU>0.

Ans of 2nd ques)-  here option 'b' is correct. i.e. The time price of a good is directly proportional to the money price.

Explaination: A method whereby a seller charges one amount for the immediate cash payment of merchandise and another amount for the same item or items when payment is rendered at a future date or in installments.The immediate payment price is called the money-price; the later price is known as the time-price.

And time price derives from money price i.e. more money price today for any good means high time price for that good and vice versa.