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.

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Definitions:

Normal Balance

The side (debit or credit) of an account that is usually increased, reflecting its nature as an asset, liability, equity, revenue, or expense.

Equity

The ownership interest held by shareholders in a corporation, calculated as total assets minus total liabilities.

Liability

A financial obligation or debt that a company owes to others, which must be settled over time through the transfer of assets or services.

Asset

An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit.