Assume You Are Spending Your Full Budget and Purchasing Such

question 226

Multiple Choice

Assume you are spending your full budget and purchasing such amounts of X and Y that the marginal utility from the last units consumed is 40 and 20 utils, respectively. Assume (a) the prices of X and Y are $8 and $4 respectively; (b) it takes 3 hours to consume a unit of X and 1 hour to consume a unit of Y; and (c) your time is worth $2 per hour. You

• A) should substitute X for Y until the marginal utility per hour is the same for both products.
• B) are consuming X and Y in the optimal amounts.
• C) should consume less of Y and more of X.
• D) should consume less of X and more of Y.

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