Question

multiple choice

Suppose the company E-bikes R US has an isocost line that crosses the isoquant twice.
To cost minimize, E-bikes R US will
A) use a different isocost line to select the bundle of inputs.
B) use the input bundle associated with the intersection on the higher point of the isoquant.
C) use the input bundle associated with the intersection on the lower point of the isoquant.
D) Both B and C.

Suppose Bob consumes e-bikes and scooters. If Bob’s income and prices of both goods
increase by the same percentage,
A) Bob will buy more of both goods.
B) Bob will buy more of both goods if they are both normal goods.
C) Bob will buy less of both goods if they are both inferior goods.
D) Bob’s utility maximizing bundle stays the same.

Answer 1

1. Suppose the company E-bikes R US has an isocost line that crosses the isoquant twice.
To cost minimize, E-bikes R US will

C) use the input bundle associated with the intersection on the lower point of the isoquant.

Explaination :- The obvious answer is use the input bundle associated with the intersection on the lower point of the isoquant because as we know the isoquant line shows the quantity of the material and labour used in the product where isocost line shows the cost of the product . Thus the intersection on the lower point of the isoquant will show the minimum cost possible.

2. Suppose Bob consumes e-bikes and scooters. If Bob’s income and prices of both goods
increase by the same percentage,

D) Bob’s utility maximizing bundle stays the same.

Explaination :- Answer is already given in the question itself , eg. If Bob’s income and prices of both goods
increase by the same percentage, than there is no change for the bob as his income also increased but the price of the good is also increased with the same percentage . Then it did not made a big difference in his income to buy more of these goods and it will remain same.