You Are Thinking of Making Your Mansion More Energy Efficient

question 68

Multiple Choice

You are thinking of making your mansion more energy efficient by replacing some of the light bulbs with compact fluorescent bulbs, and insulating part or all of your exterior walls. Each compact fluorescent light bulb costs $4 and saves you an average of $2 per year in energy costs, and each square foot of wall insulation costs $1 and saves you an average of $0.20 per year in energy costs. Your mansion has 200 light fittings and 2,000 sq. ft. of uninsulated exterior wall. To impress your friends, you would like to spend as much as possible, but save no more than $600 per year in energy costs (you are proud of your large utility bills) . How many compact fluorescent light bulbs and how many square feet of insulation should you purchase How much will you save in energy costs per year ?

• A)100 fluorescent light bulbs, 2,000 square feet of insulation should be purchased, and $600 per year will be saved
• B) 200 fluorescent light bulbs, 1,000 square feet of insulation should be purchased, and $600 per year will be saved
• C) 200 fluorescent light bulbs, 0 square feet of insulation should be purchased, and $800 per year will be saved
• D) 0 fluorescent light bulbs, 2,000 square feet of insulation should be purchased, and $2,000 per year will be saved
• E) no solution

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases, inversely related to income changes.

Substitution Effect

The change in consumption patterns due to a change in relative prices, causing consumers to substitute cheaper goods for more expensive ones.

Indifference Curve

A graph representing different bundles of goods between which a consumer is indifferent, showing combinations that provide the same level of satisfaction.

Substitution Effect

A concept in economics describing the change in consumption resulting from a change in the price of one good relative to the price of other goods.