4. A consumer uses all her available income to buy food and gasoline. Her indifference curveand budget constraint are shown in the diagram below. At point A, the marginal utility perdollar spent on food isthe marginal utility per dollar spent on gasoline.gasolineAICfooda. greater thanb. less thanc. equal to5. Megan is currently spending her entire candy budget. According to her preferences, youcould take away up to 5 candy bars if you give her 3 bags of sour patch kids withoutchanging her utility. The price of a candy bar is $0.75 and the price of a bag of sour patchkids is $1.50. Is Megan maximizing her utility? If not, how should she change herconsumption bundle?a. No, she should buy more candy bars and fewer bags of sour patch kids.b. No, she should buy more bags of sour patch kids and fewer candy bars.c. No, she should buy more bags of sour patch kids and more candy bars.d. No, she should buy fewer bags of sour patch kids and fewer candy bars.e. Yes, she is maximizing her utility.

Answer 4 OPTION C - EQUAL TO CONSUMER MAXIMIZE UTILITY when indifference curve tangent to budget. At…

4. A consumer uses all her available income to buy food and gasoline. Her indifference curve and budget constraint are shown in the diagram below. At point A, the marginal utility per dollar spent on food is the marginal utility per dollar spent on gasoline. soline IC

4. A consumer uses all her available income to buy food and gasoline. Her indifference curve and budget constraint are shown in the diagram below. At point A, the marginal utility per dollar spent on food is the marginal utility per dollar spent on gasoline. soline IC

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

4. A consumer uses all her available income to buy food and gasoline. Her indifference curve
and budget constraint are shown in the diagram below. At point A, the marginal utility per
dollar spent on food is
the marginal utility per dollar spent on gasoline.
gasoline
A
IC
food
a. greater than
b. less than
c. equal to
5. Megan is currently spending her entire candy budget. According to her preferences, you
could take away up to 5 candy bars if you give her 3 bags of sour patch kids without
changing her utility. The price of a candy bar is $0.75 and the price of a bag of sour patch
kids is $1.50. Is Megan maximizing her utility? If not, how should she change her
consumption bundle?
a. No, she should buy more candy bars and fewer bags of sour patch kids.
b. No, she should buy more bags of sour patch kids and fewer candy bars.
c. No, she should buy more bags of sour patch kids and more candy bars.
d. No, she should buy fewer bags of sour patch kids and fewer candy bars.
e. Yes, she is maximizing her utility.

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