For the Questions , Assume James Purchases Only Two

question 6

Multiple Choice

For the questions , assume James purchases only two goods, steak and chicken, with his weekly income of $60. The price of steak is $10 and the price of chicken is $5. The following table shows the marginal utility James obtains from each additional pound of steak and chicken:

$$\begin{array} { l ccc} \text { Quantity } & \begin{array} { l } \text { Marginal utility of } \\\text { steak }\end{array} & \begin{array} { c } \text { Marginal utility of } \\\text { chicken }\end{array} & \\\hline 1 & 70 & 50 \\2 & 60 & 40 & \\ 3 & 50 & 30 & \\4 & 40 & 20 & \\5 & 32 & 10 &\end{array}$$
-If the price of steak falls to $8, what quantities of steak and chicken should James purchase to maximize his utility?

• A) 6 steak, 2 chicken
• B) 5 steak, 3 chicken
• C) 4 steak, 4 chicken
• D) 5 steak, 4 chicken
• E) 3 steak, 6 chicken

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Definitions:

Face Value

The nominal or dollar value printed on a security or financial instrument, representing its value upon maturity or redemption.

Treasury Bill

A short-term government security issued at a discount from the face value and yielding the face value upon maturity.

Market Rate

The prevailing interest rate available in the marketplace for securities or loans, dictated by supply and demand forces.

Simple Interest

Interest earned or paid only on the original principal amount invested or loaned.