Question

QUESTION 29

1. Jimmy-Bob is at the bar eating pizza. Suppose pizza costs $2 per slice. If engaging in marginal thinking/analysis, Jimmy-Bob will eat another slice if

   	A.	the benefit received from his total pizza consumption equals $2.
   	B.	the additional cost of another pizza slice with beer is less than $2.
   	C.	the additional benefit of another slice of pizza is at least $2.
   	D.	the additional benefit of another slice is at least $5 (the cost of a slice and gas to get to the bar).

3 points   

QUESTION 30

1. Suppose S. Claus has allocated his entire budget to the purchase of milk and cookies. The marginal utility of the last cup of milk purchased is 50 utils and each cup of milk costs 50 cents. The marginal utility of the last cookie purchased is 30 utils and each cookie costs 60 cents. S. Claus should:

   	A.	buy more milk and fewer cookies because of the lower price for milk.
   	B.	buy more milk and fewer cookies because milk is healthier for him.
   	C.	buy more milk and fewer cookies because he gets more marginal utility per dollar from milk.
   	D.	buy more cookies and less milk because he gets more marginal utility per dollar from cookies.

Answer 1

29. Only when marginal benefit will be atleast as much as the marginal cost, the additional unit will be consumed.

The correct option is therefore

the additional benefit of another slice of pizza is at least $2.

30. Marginal utility from last cent spent on milk =50/50=1 utils.

For cookies = 30/60 =0.5 utils.

Because more utility is attained from milk, milk consumption will increase and that of cookies will decrease.

The correct option is therefore

buy more milk and fewer cookies because he gets more marginal utility per dollar from milk.