1. In the optimal bundle purchased by a consumer, the ratio of marginal utilities _______ equals the ratio of prices.

A) Never

B) Sometimes

C) Always

James previously worked as a waiter that gave him a budget of $10 per week to spend on either chocolates or ice cream, both of which cost him $2.5 each. At those prices, James ate equal amounts of chocolate bars and ice cream. James now switches his job to work at the ice cream shop, which allows him to spend $7 on chocolates and ice cream per week. But as an employee benefit, he only has to pay $1 for ice cream.

1. What is the effect of switching jobs on James's welfare?

A) The effect on James's welfare cannot be determined from given information

B) James's welfare is unaffected

C) James's welfare is harmed

D) James's welfare is improved

2) Suppose we further know that James's indifference curves have no kinks. In this case, what is the effect of switching jobs on James's welfare?

A) The effect on James's welfare cannot be determined from given information

B) James's welfare is unaffected

C) James's welfare is harmed

D) James's welfare is improved

3) Receiving cash _______ makes someone strictly better off than receiving the same amount of money in food stamps.

A) Never

B) Sometimes

C) Always