Scenario 16.3: Sam and Sally Are the Only Consumers in an Economy

question 123

Multiple Choice

Scenario 16.3:
Sam and Sally are the only consumers in an economy where tee shirts and candy are the only commodities that are consumed. The marginal utility schedule for each appears below.
Sam tee shirts MU(tee shirts) Candy MU(Candy)
1 10 1 6
2 9 2 5
3 8 3 4
4 7 4 5
5 6 5 4
Sally tee shirts MU(tee shirts) Candy MU(Candy)
1 24 1 12
2 19 2 9
3 18 3 8
4 14 4 7
5 10 5 3
There are 7 candies and 7 tee shirts total in the economy.
Consider the case when the goods are redistributed such that Sam has 4 tee shirts and 4 candies. Sally has 3 tee shirts and 3 candies.
-Refer to Scenario 16.3. What is the relative price of tee shirts to candy?

• A) $2.25
• B) $2
• C) $1.40
• D) The relative price will be between $2.25 and $1.40.
• E) It is impossible to determine.

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