Tyrell Has $50 to Spend on Good a and Good

question 117

Multiple Choice

Tyrell has $50 to spend on good A and good B per week. The price of good A is $5 and that of good B is $4. He buys six units of good A and five units of good B. The marginal utility of the sixth unit of A is 25 units, and the marginal utility of the fifth unit of B is 20 units. Which of the following is true?​

• A)He is maximizing his utility.
• B)His last dollar spent on good A exceeds the last dollar spent on good B.
• C)He is not maximizing his utility and should buy more of A.
• D)He is not maximizing his utility and should buy more of B.
• E)He is not maximizing his utility because he is not spending all of his income.

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Definitions:

Unidimensionality

A Guttman scale consists of a single (low to high) dimension. It is also cumulative; that is, agreement with the highest-scoring item implies agreement with all lower-scoring items.

Bogus Pipeline Technique

A psychological technique used in social research to elicit honest responses from participants by falsely claiming the existence of a lie-detector-like mechanism.

Hierarchies

Systems or organizations in which members are ranked one above the other according to status or authority.

Free Market System

An economic system based on supply and demand with minimal government intervention, where prices for goods and services are determined freely by the open market.