AP Micro Final
Which of the following must be true if at the tenth unit of output, marginal cost (MCMC) is $130$130 and average total cost (ATCATC) is $150$150 ? A ATCATC of producing the ninth unit is higher than $150$150. B ATCATC of producing the ninth unit is less than $150$150. C MCMC of producing the ninth unit is higher than $130$130. D The average variable cost of producing the tenth unit is higher than $150$150. E The average variable cost of producing the tenth unit is equal to $20$20.
A ATCATC of producing the ninth unit is higher than $150$150.
Suppose that the market for low-wage labor is perfectly competitive and initially in equilibrium. If the government establishes an effective minimum wage, which of the following will occur? A Employment of low-wage workers will decrease and unemployment will increase. B The quantity of low-wage workers supplied will be less than the quantity demanded. C The total wage payment received by all low-wage workers will increase. D Economic efficiency will increase, since firms were paying workers less than the value of their marginal revenue product. E Low-wage workers will be motivated to form a union
A Employment of low-wage workers will decrease and unemployment will increase.
After graduating from high school, Maria chose to go to college, while Omar chose to work full- time. Which of the following best describes the opportunity costs for these decisions? A Maria's opportunity cost includes the salary she could have earned if she had gone to work. B Maria's opportunity cost is her living expenses while attending college. C Omar's opportunity cost is the salary he will earn from working. D Omar's opportunity cost is the tuition and expenses he would have paid for college. E Omar's opportunity cost is definitely greater than Maria's.
A Maria's opportunity cost includes the salary she could have earned if she had gone to work.
A typical firm in a perfectly competitive constant-cost industry is operating with an economic loss in the short run. When the industry returns to long-run equilibrium, what will happen to the number of firms in the industry, the market price, and the typical firm's quantity? A Number of FirmsMarket PriceFirm's QuantityDecreaseIncreaseIncrease B Number of FirmsMarket PriceFirm's QuantityDecreaseDecreaseIncrease C Number of FirmsMarket PriceFirm's QuantityDecreaseIncreaseDecrease D Number of FirmsMarket PriceFirm's QuantityIncreaseIncreaseDecrease E Number of FirmsMarket PriceFirm's QuantityIncreaseDecreaseDecrease
A Number of FirmsMarket PriceFirm's QuantityDecreaseIncreaseIncrease
Assume a perfectly competitive firm is currently producing 100100 units of output. Its marginal cost is $6$6 and rising at that output quantity. Its average variable cost is $7$7 and its average fixed cost is $3$3. If the product's price is $6$6, which of the following will the firm do in the short run to maximize its profit? A Shut down B Produce, but less than 100100 units of output C Produce more than 100100 units of output D Continue to produce at exactly 100100 units of output E Increase its price above $6
A Shut down
Assume that firms providing health-care services to older people operate in a perfectly competitive market. What must happen in the market for health-care workers if there is an increase in the number of older people in a country? A The demand for health-care workers will increase. B The marginal factor cost in the health-care industry will decrease. C The number of health-care workers will decrease. D The quality of health-care services will increase. E The wages of health-care workers will decrease.
A The demand for health-care workers will increase.
There are four firms in an oligopolistic industry. The four firms agree to collude and act like a monopoly. If one of the firms violates the agreement and charges a lower price or sells a larger quantity than what was agreed to, what will happen in the short run? A The firm that cheats will earn higher profits, and industry profits will be lower. B The firm that cheats will earn higher profits, and industry profits will be higher. C The firm that cheats will earn lower profits, and industry profits will be lower. D The firm that cheats will earn lower profits, and industry profits will be higher. E The firms that do not cheat will earn higher profits.
A The firm that cheats will earn higher profits, and industry profits will be lower.
Assume a 10 percent increase in price increased the market quantity supplied by 20 percent. Which of the following is true? A The value of the price elasticity of supply is 2. B The value of the price elasticity of supply is 0.5. C Supply is price inelastic. D Demand is price elastic. E This price-quantity combination violates the law of supply.
A The value of the price elasticity of supply is 2.
When the demand for new homes decreases, the demand for construction workers who build homes decreases. This relationship illustrates the concept of A derived demand B diminishing marginal productivity of labor C substitution in production D supply shock E property rights
A derived demand
If a firm engages in perfect price discrimination, it charges A each customer the highest price the customer is willing to pay B each customer the average cost of the product C each customer the lowest price the customer is willing to pay D different prices to customers based on how old they are E different prices to customers based on how many units of output they buy
A each customer the highest price the customer is willing to pay
The condition for allocative efficiency is violated when A firms are price makers( price searchers) B short-run profits exist in a competitive industry C price equals average total cost D the market demand curve is inelastic in a competitive industry E the market demand curve is elastic in a competitive industry
A firms are price makers( price searchers)
If a store raises its prices by 20 percent and its total revenue increases by 10 percent, the demand it faces in this price range must be A inelastic B elastic C unit elastic D perfectly elastic E perfectly inelastic
A inelastic
A profit-maximizing firm hires labor in a perfectly competitive market. Labor is the only variable input, and the marginal product of the last worker hired is 10 units per hour. If the hourly wage is $20, the firm's marginal revenue A is $2 B is $20 C increases as more output is produced D increases first and then decreases as more output is produced E decreases first and then increases as more output is produced
A is $2
A chemical plant pollutes a river that serves as the water supply for a nearby town. From an economist's point of view, pollution from the plant should be reduced until the A marginal benefit from the cleaner water is equal to the marginal cost of making the water cleaner B marginal benefit from cleaner water is maximized C total benefit from cleaner water is zero D total benefit from cleaner water is equal to the total cost of making the water cleaner E total benefit from cleaner water is maximized
A marginal benefit from the cleaner water is equal to the marginal cost of making the water cleaner
An effective minimum wage policy in a competitive market will increase unemployment and increase the total earnings of labor only if the demand for labor is A relatively inelastic B relatively elastic C unit elastic D greater than the supply E positively related to the wage rate
A relatively inelastic
The Lorenz curve represents the relationship between A the cumulative percentage of households and the cumulative percentage of income B income tax rates and income tax revenues C child labor rates and the poverty levels D income inequality and education level E market structure and the number of firms in the market
A the cumulative percentage of households and the cumulative percentage of income
Bruce is a talented writer and graphic artist who enjoys both types of work equally. Instead of earning $45,000 as a writer, Bruce now earns $25,000 in accounting profits as a graphic artist using the same computer equipment he would have used as a writer. What is Bruce's economic profit from choosing to work as a graphic artist? A -$45,000 B -$20,000 C $20,000 D $45,000 E $70,000
B -$20,000
If a normal good is produced in a competitive market, which of the following combination of events could cause the price of the good to increase and the quantity to decrease? A An increase in the average income of consumers and an increase in the number of producing firms B An increase in the average income of consumers and an increase in the price of a variable input C An increase in the price of a substitute good an an increase in the number of producing firms D A decrease in the number of consumers and a decrease in the price of a variable input E A decrease in the average income of consumers and an increase in the number of producing firms
B An increase in the average income of consumers and an increase in the price of a variable input
Which of the following statements about the market supply curve is true? A An increase in input prices will shift the market supply curve to the right. B At each price, a horizontal summation of the quantity supplied by each firm will yield the market supply curve. C At each quantity supplied, a vertical summation of the price set by each firm will yield the market supply curve. D A decrease in the price will shift the market supply curve to the left. E The law of supply states that the market supply curve may shift right, shift left, or remain the sa
B At each price, a horizontal summation of the quantity supplied by each firm will yield the market supply curve.
Jane spends all her weekly allowance to buy only two goods: soda and apples. According to the table above, if her preferences are characterized by the law of diminishing marginal utility, then which of the following statements is correct? A Jane is maximizing her utility. B Jane can buy more apples and less soda to maximize her utility. C Jane can buy more soda and fewer apples to maximize her utility. D Jane can buy more apples and the same amount of soda to maximize her utility. E Jane can buy more soda and the same amount of apples to maximize her utility.
B Jane can buy more apples and less soda to maximize her utility.
Antitrust policies are put in place to limit which of the following? A Income inequality B Monopoly power C Double taxation of corporations D Price ceilings E The provision of public goods
B Monopoly power
If the demand for product X is perfectly elastic and the supply of product X decreases, which of the following will occur in the market for X ? A Total revenue will increase. B Total revenue will decrease. C Total revenue will remain the same. D Quantity demanded will exceed quantity supplied. E Quantity supplied will exceed quantity demanded.
B Total revenue will decrease.
The monopsonist's marginal factor (resource) cost curve for labor is A above the labor supply curve because the product price is found on the demand curve above where marginal cost equals marginal revenue B above the labor supply curve because to hire more workers the firm must raise the wage for all workers C below the labor supply curve because the firm is a wage taker D below the labor supply curve because of diminishing marginal returns to labor E below the labor supply curve because to sell additional units of output the firm must lower its product price
B above the labor supply curve because to hire more workers the firm must raise the wage for all workers
The firm's cost function exhibits A diseconomies of scale B constant returns to scale C economies of scale D decreasing marginal cost E increasing marginal cost
B constant returns to scale
The government must provide public goods such as national defense because A the production of public goods requires economies of scale that the private sector cannot achieve B it is generally impossible to exclude individuals who value public goods but do not pay for them C public goods cannot be produced in private competitive markets, since they have highly inelastic demand D private producers charge a price that is substantially greater than marginal cost E no single individual should have to pay for public goods, since they benefit society as a whole
B it is generally impossible to exclude individuals who value public goods but do not pay for them
The socially optimal quantity of a public good is provided when A marginal private cost equals marginal private benefit B marginal social cost equals marginal social benefit C total private cost equals total social benefit D total social cost equals total social benefit E marginal social benefit minus marginal social cost is at a maximum
B marginal social cost equals marginal social benefit
The following questions refer to the following diagram, which shows the marginal social cost (MSC), the marginal private cost (MPC), and the marginal social benefit (MSB) associated with the production of a good in a market. The government can attempt to correct the externality by setting a A per-unit tax equal to (P4 − P1) B per-unit tax equal to (P4 − P2) C per-unit subsidy equal to (P4 − P2) D per-unit subsidy equal to (P3 − P2) E price ceiling at P2
B per-unit tax equal to (P4 − P2)
If there is only one variable input, diminishing marginal returns first occur with the production of which unit of output? A 7th B 6th C 5th D 4th E 3rd
C 5th
Which of the following describes a factor of production that is not fully scarce and that can be used simultaneously in the production of more than one good? A Machines that can produce both clothing and bedsheets B Unskilled labor needed to produce all goods C Basic knowledge that enhances the organization of all manufacturing assembly lines D Land that is cultivated for two crops by more than one farmer E Labor that has received enhanced training in assembly-line work
C Basic knowledge that enhances the organization of all manufacturing assembly lines
Assume that a monopolistically competitive firm is currently maximizing profit with an output of 100 units and a price of $50. Which of the following is true? A Total revenue is maximized when the firm produces 100 units of output. B Marginal revenue equals $50 when the firm produces 100 units of output. C Marginal cost is greater than marginal revenue when the firm produces 150 units of output. D Marginal cost is minimized when the firm produces 100 units of output. E Average total cost is minimized when the firm produces 100 units of output.
C Marginal cost is greater than marginal revenue when the firm produces 150 units of output.
Assume a consumer is spending all her income on two goods: X and Y. At the current consumption combination of the two goods, if the marginal utility per dollar spent on the last unit of good X exceeds that of the marginal utility per dollar spent on the last unit of good Y, what should the consumer do to maximize utility? A Purchase more units of X and more units of Y. B Decrease the price of good X. C Purchase more units of X and less units of Y. D Increase income to buy more of both good Y and good X. E Nothing; utility is maximized at current consumption bundles.
C Purchase more units of X and less units of Y.
The graph above shows the cost curves for May's Fruit Farm, where MCMC is marginal cost, ATCATC is average total cost, and AVCAVC is average variable cost. May's short-run supply curve includes which of the following points? A TWTW B RSTRST C STVSTV D STWSTW E RSTV
C STV
Assume that in a competitive equilibrium, 1,000 units are sold at $20 per unit. Following the imposition of a $4.00 per unit tax, the new consumer price is $23, and the new equilibrium quantity is 950 units. What are the values of the tax revenue collected and the deadweight loss? A Tax revenue $4,000; Deadweight loss $3,000 B Tax revenue $3,800; Deadweight loss $200 C Tax revenue $3,800; Deadweight loss $100 D Tax revenue $3,000; Deadweight loss $100 E Tax revenue $200; Deadweight loss $200
C Tax revenue $3,800; Deadweight loss $100
Which of the following is most likely to occur if the firm increases production beyond 10 units? A Consumers would be willing to purchase more than 10 units at the price of $20 per unit. B The firm would definitely experience a loss. C The firm would have to lower its price to sell more than 10 units. D The firm's average cost of production would initially increase. E The firm's profits would increase.
C The firm would have to lower its price to sell more than 10 units.
At the current quantity that a firm is selling, the firm has marginal revenue of $750$750 and marginal cost of $800$800. Which of the following is true? A The firm is maximizing profit. B The firm's profits would increase if the firm increased the quantity sold. C The firm's profits would increase if the firm decreased the quantity sold. D The firm earns negative economic profit. E The firm earns zero accounting profit.
C The firm's profits would increase if the firm decreased the quantity sold.
Which of the following is a necessary condition for price discrimination? A Resale of the product or service is possible. B Buyers have identical elasticities of demand. C The seller can separate consumers according to their elasticities of demand. D The seller is a perfectly competitive firm. E Buyers are aware of prices charged to other buyers.
C The seller can separate consumers according to their elasticities of demand.
Oscar spent his entire income on only two goods: good X and good Y. At his current consumption of the two goods, the marginal utility of X is 8 and the marginal utility of Y is 2. If the price of X is $4.00 and the price of Y is $0.50, then to maximize his total utility, Oscar should have A bought more X and more Y B bought more X and less Y C bought less X and more Y D bought less X and less Y E maintained his current consumption
C bought less X and more Y
Antitrust laws are designed to maintain a competitive market environment by A eliminating monopolies wherever they exist B preventing monopolies from generating negative externalities C limiting practices that increase a firm's market power D imposing price ceilings on products produced by monopolies E making charging a price above marginal cost illegal
C limiting practices that increase a firm's market power
In the short run, a decrease in production costs of a product will shift A both the demand curve and the supply curve to the right B the demand curve to the left and the supply curve to the right C only the supply curve to the right D only the supply curve to the left E only the demand curve to the left
C only the supply curve to the right
The firm shown in the diagram above qualifies as a natural monopoly because A the demand curve is downward sloping B the demand curve lies above the marginal revenue curve C the average total cost is decreasing in the relevant range of market demand D the firm can maximize profit with any output level it chooses E marginal revenue is positive at the profit-maximizing output level
C the average total cost is decreasing in the relevant range of market demand
A firm uses capital and labor in its production process. The marginal product for the last unit of labor is 5, the marginal product for the last unit of capital is 10, and the wage is $10. At what cost of hiring each unit of capital would the firm be minimizing the cost of the current output? A $5 B $10 C $15 D $20 E $50
D $20
The table above shows the total benefit Tony gets from eating different quantities of apples. If apples cost $3 each, how many should he buy to maximize his consumer surplus? A 1 B 2 C 3 D 4 E 5
D 4
Assume the market for disposable coffee cups is in equilibrium and disposable coffee cups are inputs for serving brewed coffee. Which of the following will result in a higher short-run equilibrium price of disposable coffee cups? A A decrease in the supply of coffee B A decrease in the number of locations serving brewed coffee C An increase in the supply of disposable coffee cups D An increase in the demand for brewed coffee E An increase in the price of tea, a complement for coffee
D An increase in the demand for brewed coffee
Which of the following is true for a firm that uses labor as a variable input and capital as a fixed input in the short run? A If the marginal product of labor is negative, the average product of labor must also be negative. B If the marginal product of labor is rising, the average product of labor must be greater than the marginal product of labor. C If the average product of labor is rising, the marginal product of labor must be rising. D If the average product of labor is falling, the marginal product of labor must be less than the average product of labor. E The average product of labor can never be equal to the marginal product of labor.
D If the average product of labor is falling, the marginal product of labor must be less than the average product of labor.
The table above shows the maximum possible output combinations of good X and good Y that Microland can produce by using all of its available resources and technology. As the production of good X increases, what happens to the opportunity cost of producing good X? A It decreases, because the production of good Y decreases by greater amounts. B It decreases, because the production of good Y increases by smaller amounts. C It remains constant, because the production of good X increases by the same amount. D It increases, because the production of good Y decreases by greater amounts. E It increases, because the production of good Y increases by smaller amounts.
D It increases, because the production of good Y decreases by greater amounts.
A profit-maximizing, perfectly competitive firm is currently in long-run equilibrium. It is earning $15,000 of total revenue from a sale of 1,000 units. Its total fixed cost of production is $2,500. Which of the following can correctly be inferred from the information provided? A Its marginal cost is $12.50, and its average total cost is $12.50. B Its marginal cost is $12.50, and its average variable cost is $12.50. C Its marginal cost is $15.00, and its average total cost is $12.50. D Its marginal cost is $15.00, and its average variable cost is $12.50. E Its marginal cost is $15.00, and its average fixed cost is $12.50.
D Its marginal cost is $15.00, and its average variable cost is $12.50.
Assume that a firm is maximizing short-run profits and that price is greater than average variable cost. Which of the following must be true at the firm's level of output? A Marginal revenue is equal to average total cost. B Marginal revenue is greater than total variable cost. C Marginal revenue is equal to price, which is greater than average total cost. D Marginal revenue is equal to marginal cost. E Price is equal to average total cost.
D Marginal revenue is equal to marginal cost.
The following questions refer to the following diagram, which shows the marginal social cost (MSC), the marginal private cost (MPC), and the marginal social benefit (MSB) associated with the production of a good in a market. Which of the following describes the type of externality generated by the unregulated private market and the resulting deadweight loss? A Type of ExternalityDeadweight LossPositiveegh B Type of ExternalityDeadweight LossPositiveehf C Type of ExternalityDeadweight LossNegativeehf D Type of ExternalityDeadweight LossNegativeegh E Type of ExternalityDeadweight LossNegativeP4ghP2
D Negative, EGH
The table above shows the maximum number of palm leaves or coconuts that Robert and Frank can pick respectively in a single day. Which of the following is true? A Robert has a comparative advantage in picking coconuts. B Frank has a comparative advantage in picking palm leaves. C Robert and Frank can both benefit from trade with each other if 1 coconut is traded for 1 palm leaf. D Robert and Frank can both benefit from trade with each other if 1 coconut is traded for 3 palm leaves. E Robert and Frank can both benefit from trade with each other if 1 coconut is traded for 5 palm leaves.
D Robert and Frank can both benefit from trade with each other if 1 coconut is traded for 3 palm leaves.
Assume that barber shops operate in perfectly competitive product and factor markets. Which of the following will happen to working barbers if the price of haircuts decreases? A The marginal product of the last barber hired will not change. B The marginal product of the last barber hired will decrease. C The marginal revenue product curve will shift to the right. D The marginal revenue product curve will shift to the left. E There will be a movement upward along the marginal revenue curve.
D The marginal revenue product curve will shift to the left.
Assume accountants and teachers have identical marginal revenue product schedules. Which of the following provides an explanation for why accountants receive higher starting salaries than school teachers? A Accountants have less human capital than school teachers. B Accountants have lower opportunity cost than school teachers. C Accounting firms provide a more pleasant work environment than schools provide. D The supply of accountants is low relative to the supply of teachers. E Fewer teaching majors graduate from college each year than accounting majors.
D The supply of accountants is low relative to the supply of teachers.
Economies of scale can be illustrated by A an increasing short-run marginal cost curve as a firm produces more output B a decreasing short-run average total cost curve as a firm produces more output C a downward-sloping long-run supply curve for an industry D a decreasing long-run average total cost curve as a firm produces more output E an increasing long-run average total cost curve as a firm produces more output
D a decreasing long-run average total cost curve as a firm produces more output
Compared with a perfectly competitive market,a single-price monopoly with the same market demand and cost curves will A increase output and price B increase output and decrease price C decrease output and price D decrease output and increase price E produce the same level of output and increase price
D decrease output and increase price
One major difference between public goods and private goods is that A public goods exclude nonpaying consumers, while private goods are available to all B public goods are inferior goods, while private goods are normal goods C public goods generate negative externalities, while private goods generate positive externalities D it is difficult to charge customers directly for the provision of public goods E it is impossible for private firms to produce public goods
D it is difficult to charge customers directly for the provision of public goods
In monopolistic competition, a goal of advertising is to A reduce a firm's short-run average total cost B minimize a firm's long-run average total cost C make a firm's demand curve more elastic D make a firm's demand curve less elastic E shift a firm's demand curve to the left
D make a firm's demand curve less elastic
The following questions are based on the table below, which shows a firm's average variable cost and average total cost. The average fixed cost of producing four units of output is equal to A $120 B $95 C $75 D $50 E $30
E $30
When two firms interact in an oligopolistic market, which of the following statements is true? A If one firm has a dominant strategy, then the other firm does not have a dominant strategy. B If one firm has a dominant strategy, then the other firm also has a dominant strategy. C Both firms must have dominant strategies. D If one firm has a dominant strategy, then there is no Nash equilibrium. E If both firms have dominant strategies, then there is a Nash equilibrium.
E If both firms have dominant strategies, then there is a Nash equilibrium.
Which of the following is true of a monopsony in a labor market? A It faces a labor supply curve that is horizontal at the competitive market equilibrium wage. B Its marginal factor (resource) cost is the same as the market supply curve. C At its optimal level of employment, it pays a wage rate higher than the competitive market wage rate. D The imposition of a minimum wage results in a larger reduction in employment than is true in a competitive market. E Its marginal factor (resource) cost curve lies above the labor supply curve because hiring an extra worker means paying more to existing workers.
E Its marginal factor (resource) cost curve lies above the labor supply curve because hiring an extra worker means paying more to existing workers.
Assume that the current market equilibrium price for milk is $2.80 per gallon and that 5 million gallons are sold per day. If the government sets a price ceiling of $2.00 per gallon, which of the following is true? A The demand for milk will increase. B The supply of milk will decrease. C There will be an excess supply of milk in the market. D More than 5 million gallons of milk will be sold. E Less than 5 million gallons of milk will be sold.
E Less than 5 million gallons of milk will be sold.
As the population of a country ages, the demand for health care is projected to increase. As a result, the health care industry is likely to experience all of the following EXCEPT A an increase in demand for health care workers B an increase in demand for medicine C an increase in the quantity of health care workers supplied D an increase in the wages of health care workers E a decrease in the prices of medicine
E a decrease in the prices of medicine
The marginal benefit of consuming a good is A the change in average utility that results from consuming one more unit of the good B the same as the total benefit C equal to the marginal cost of the good D the change in total expenditures as a result of buying one more unit of the good E the maximum amount a consumer is willing to pay for one more unit of the good
E the maximum amount a consumer is willing to pay for one more unit of the good
Jamal quits a job that was paying him $30,000$30,000 per year and decides to start his own business. He runs his business out of his house in a room he had been renting to his colleague for $12,000$12,000 a year. Jamal withdraws the $20,000$20,000 in his savings account that had been earning him a 1010 percent annual interest to purchase computers and related accessories and equipment for the business. During the first year of operation, Jamal's business incurred $30,000$30,000 in explicit costs and generated $60,000$60,000 in total sales. Jamal's economic profit is A $30,000 $30,000 B $17,000 $17,000 C $0 $0 D −$2,000 −$2,000 E −$14,000 −$14,000
E −$14,000 −$14,000
Max employs both labor and capital to produce toy trains. Currently the last unit of labor employed has a marginal product of 15 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $3 per unit, and the price of capital is $10 per unit. Which of the following employment decisions should Max follow to use the least-cost combination of labor and capital to produce the current quantity of toy trains? A Employment of LaborEmployment of CapitalIncreaseNo change B Employment of LaborEmployment of CapitalDecreaseIncrease C Employment of LaborEmployment of CapitalDecreaseDecrease D Employment of LaborEmployment of CapitalIncreaseIncrease E Employment of LaborEmployment of CapitalIncreaseDecrease
Increase and Decrease
Which of the following relationships among the price elasticity of demand, change in price, and change in total revenue is consistent? A Price Elasticityof DemandChangein PriceChange inTotal RevenueElasticIncreaseIncrease B Price Elasticityof DemandChangein PriceChange inTotal RevenueElasticDecreaseDecrease C Price Elasticityof DemandChangein PriceChange inTotal RevenueUnit ElasticDecreaseDecrease D Price Elasticityof DemandChangein PriceChange inTotal RevenueInelasticDecreaseIncrease E Price Elasticityof DemandChangein PriceChange inTotal RevenueInelasticDecreaseDecrease
Inelastic, Decrease, Decrease
An art student spends all of her income on pencils and drawing pads. The student currently buys 30 pencils at $1 each and 10 pads at $5 each. If the marginal utility of the 30th pencil is 100 utils and the marginal utility of the 10th pad is 400 utils, to maximize utility the student should change her purchases of pencils and pads in which of the following ways? A PencilsPadsNot changeBuy more B PencilsPadsBuy moreBuy more C PencilsPadsBuy moreBuy less D PencilsPadsBuy lessBuy more E PencilsPadsBuy lessBuy less
More pencils, less pads
