Ten Individuals Have $100 and Identical Preferences for Picnics,p,and Kayak

question 96

Multiple Choice

Ten individuals have $100 and identical preferences for picnics,p,and kayak trips,k,where U(p,k) = k^0.5p^0.5.The price of picnics is $5 and the price per kayak trip is $ 10.What is the shortage/surplus in the market when the supply of picnics totals 120?

• A) There is a surplus of 20.
• B) There is a shortage of 20.
• C) The market is in equilibrium. Therefore, there is no surplus/shortage.
• D) There is not enough information to answer this question.