Advise Sarah How to Maximize Her Utility If MUA??,MUB???,PA?? and PB

question 25

Multiple Choice

Advise Sarah how to maximize her utility if MUA??,MUB???,PA?? and PB??.

• A)Consume equal amounts of both goods.
• B)Consume more of good A and less of good B.
• C)Consume more of good B and less of good A.
• D)Lower the price of good B.
• E)Raise the price of good A.

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Definitions:

Long Run

A period in economics in which all factors of production and costs are variable, allowing full adjustment to changes.

Real Wages

Wages adjusted for inflation, representing the purchasing power of income earned through work.

Resource Prices

Resource prices refer to the cost associated with the inputs used in the production of goods and services, including raw materials, labor, and capital.

Expansionary Gap

A situation in macroeconomics where the actual production of goods and services exceeds the economy's potential output, often leading to inflation.