Mutiple Choice

40.Suppose you only consume food and clothing, and clothing is plotted on the vertical axis. Also, you purchase food at a fixed price (PF), but the price of clothing declines as you buy in larger quantities (i.e., quantity discounts). What does the budget line look like in this case?

a.

The budget line is now concave to (bows out from) the origin.

b.

The budget line will not be a straight line, but it may be concave or convex.

c.

The budget line is now convex to (bows in towarD: the origin.

d.

The budget line is a straight line.

39.Amy currently earns $80 000 a year, while John earns $30 000 a year. Suppose that both of their incomes are subject to diminishing marginal utility. From a utilitarian perspective taking a dollar from Amy and giving it to John will:

a.

do none of the above

b.

increase John's marginal utility of income

c.

lower Amy's marginal utility of income

d.

increase society's total utility

38.Bill currently uses his entire budget to purchase 5 cans of Pepsi and 3 hamburgers per week. The price of Pepsi is $1 per can, the price of a hamburger is $2, Bill's marginal utility from Pepsi is 4, and his marginal utility from hamburgers is 6. Bill could increase his utility by:

a.

increasing hamburger consumption and reducing Pepsi consumption.

b.

maintaining his current consumption choices.

c.

We do not have enough information to ANSWER this question.

d.

increasing Pepsi consumption and reducing hamburger consumption.