Microeconomics

People view alcohol and marijuana as perfect substitutes. This means t

People view alcohol and marijuana as perfect substitutes. This means that A) individuals will consume either alcohol or marijuana, but not both, regardless of price. B) as the price of alcohol decreases, marijuana use decreases. C) the marginal utility for alcohol and marijuana is constant. D) Both B and C.   ANSWER D  

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Date: September 9th, 2020

Individuals derive utility from picnics, p, and kayak trips, k. Assumi

Individuals derive utility from picnics, p, and kayak trips, k. Assuming that an individual’s utility is U(p,k) = k0.5p0.5 and income is $100, what is the marginal rate of substitution (MRS) between picnics and kayak trips? A) MRS = 1. B) MRS = -1. C) MRS = -1/2 D) There is no substitution because picnics […]

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Date: September 9th, 2020