00:01
Hello, let's start with part a.
00:06
Part a is given that alex has allocated his income, that the marginal utility of the last unit of product x is 40 utilities, and the last unit of y is 16 utilities.
00:23
So we know that he can maximize his utility if he follows this rule.
00:31
The marginal utility of good x over the price of this good should be equal to the marginal utility of the second good of y, divided by the price of y.
00:46
So we know that the marginal utility of the last unit of product x is 40, and the price is $5.
00:57
Dollars the last the last item of good y gives him 16 units of utility 16 utilities and this is divided by the price of good y and we need to find this price if we solve this equation we can find that this ratio is equal to 8 so the price of good y is 8 dollars per unit oh sorry it's not 8 it should be equal to 8 16 over 8 is equal to 2 it's not 8 it's 2 dollars per 1 unit so 40 divide by 5 is equal to 8 and 16 divide by two dollars is also equal equals to eight and we have a situation at which this rule is valid.
02:13
So at the price of two dollars alex increases his utility its utility maximization approach.
02:26
Two dollars is the answer to this question and the answer is b.
02:32
$2 per unit.
02:36
Okay, the next question, let me write it like b, or it's 37, number 37.
02:46
So the decision -making process, followed by the consumer to maximize utility, assumes what? let's start with part a.
02:59
Consumers behave rationally, attempting to maximize, their satisfaction.
03:06
And yes, so if they try to maximize their utility, of course they behave rationally.
03:12
They attempt to maximize their satisfaction.
03:15
A looks like the correct answer.
03:19
But let's check other answer options to be sure that we chose the correct answer.
03:25
B, consumers have unlimited incomes.
03:29
Of course this is not correct.
03:31
Consumers do not have unlimited incomes.
03:34
C, consumers do not know how much marginal utilities they obtain from consuming additional units.
03:42
Of course, it's not correct because if they don't know, they cannot maximize their satisfaction.
03:49
C is not correct.
03:51
And d, consumers are unable to rank their preferences.
03:55
If they are unable to rank their preferences, they also don't know about their marginal utilities.
04:01
This is not correct so only answer a is the correct answer to this question okay let's look to the last part of this question so here we have a situation the question is if the marginal cost curve is below the average variable cost curve so this can happen maybe i can right, maybe i can make the graph here...