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

question 43

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 Sam's marginal rate of substitution of tee shirts for candy at the current distribution?

• A) 2
• B) 7/5
• C) 5/7
• D) It is impossible to determine without the prices of each commodity.

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Definitions:

Hartford Convention

A series of meetings from December 1814 to January 1815 in Hartford, Connecticut, where New England Federalists met to discuss their grievances concerning the ongoing War of 1812 and political problems arising from the federal government's increasing power.

Federalist Party

A first American political party in the late 18th and early 19th centuries that favored a strong central government, commercial economy, and close ties with Great Britain.

Public Opinion

The aggregate of individual attitudes or beliefs held by the adult population.

War of 1812

A conflict fought between the United States and the British Empire, along with its indigenous allies, from 1812 to 1815, often cited for its impact on U.S. nationalism and expansion.