Suppose That a Consumer Has the Utility Function U =

question 3

Multiple Choice

Suppose that a consumer has the utility function U = 5X + 7Y. The MRS_x,y is

• A) 7/5
• B) 5/7
• C) 1.00 since X and Y are perfect substitutes.
• D) 0 since X and Y are perfect complements.

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Definitions:

Japanese Yen

The official currency of Japan, used as a medium of exchange in the country.

Comparative Advantage

The ability of an individual or group to produce a good or service at a lower opportunity cost than other producers.

Opportunity Cost

The cost of missing out on the next best alternative when making a decision.

Specialize And Trade

The economic practice where individuals or entities focus on a limited scope of production to increase efficiency and then exchange their outputs for varied goods or services.