ECONOMICS
COST BENEFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Purchase more units of X and more units of Y.
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Decrease the price of good X.
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Purchase more units of X and less units of Y.
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Increase income to buy more of both good Y and good X.
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Nothing; utility is maximized at current consumption bundles.
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Detailed explanation-1: -A market economy is one in which the allocation of resources and the prices of goods and services are determined by market forces, primarily supply and demand. Market economies have little government intervention, allowing private ownership to determine all business decisions concerning how a business is run.
Detailed explanation-2: -TU = U1 + MU2 + MU3 … The total utility is equal to the sum of utils gained from each unit of consumption. In the equation, each unit of consumption is expected to have slightly less utility as more units are consumed.
Detailed explanation-3: -In market economies, there is private ownership of resources-established though property rights-and the factors of production and consumption are all coordinated through markets. In a market system, resources are allocated to their most productive use through prices that are determined in markets.
Detailed explanation-4: -Consumer choice theory is based on the assumption that the consumer fully understands his or her own preferences, allowing for a simple but accurate comparison between any two bundles of good presented.