In Problem 13, Where X Is Whips and Y Is

question 7

Multiple Choice

In Problem 13, where x is whips and y is leather jackets, if Kinko's utility function were U(x, y) = min{ 6x, 3x + 9y}, then if the price of whips were $20 and the price of leather jackets were $40, Kinko would demand

• A) 2 times as many leather jackets as whips.
• B) 3 times as many whips as leather jackets.
• C) 4 times as many leather jackets as whips.
• D) 5 times as many whips as leather jackets.
• E) only leather jackets.

Comprehend the concept of economic rent and its relation to scarce resources and production costs.

Understand how market forces of demand and supply affect short-run and long-run market prices and quantities.

Apply knowledge of cost functions to calculate optimal output and understand its implications on a firm’s profitability.

Recognize the conditions necessary for long-run equilibrium under perfect competition and the implications for firm entry and exit.