Multiple Choice
Yanas ratio of marginal utility for coffee and soda is 3:1, while the price ratio of coffee to soda is 1.5:1. Which of the following statements is (are) TRUE?
I. Coffee provides Yana with 3 times the marginal utility of soda.
II. Yana could increase utility by decreasing her consumption of coffee by 3 units and increasing her consumption of soda by 1.5 units.
III. Yana could increase utility by decreasing her consumption of soda by 3 units and increasing her consumption of coffee by 2 units.
IV. Yana could increase utility by decreasing her consumption of coffee by 1 unit and increasing her consumption of soda by 3 units.
A) IV only
B) I and II
C) I and III
D) III only
Correct Answer:
Verified
Correct Answer:
Verified
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