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Chapter 2: Q 26 (page 44)
Draw Marie鈥檚 budget constraint with pies on the horizontal axis and magazines on the vertical axis. What is the slope of the budget constraint?
The slope of the budget constrain is -3.
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Individuals may not act in the rational, calculating way described by the economic model of decision making, measuring utility and costs at the margin, but can you make a case that they behave approximately that way?
What is Marie鈥檚 opportunity cost of purchasing a
pie?
Suppose Alphonso鈥檚 town raised the price of bus tickets to \(1 per trip (while the price of burgers stayed at \)2 and
his budget remained $10 per week.) Draw Alphonso鈥檚 new budget constraint. What happens to the opportunity cost
of bus tickets?
Use this information to answer the following 4 questions: Marie has a weekly budget of \(24, which she likes to spend on magazines and pies.
If the price of a pie is \)12, what is the maximum number of pies she could buy in a week?
It is clear that productive inefficiency is a waste since resources are used in a way that produces less goods and services than a nation is capable of. Why is allocative inefficiency also wasteful?
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