i22.docx - 1. Suppose that for Jim the marginal benefit...

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1. Suppose that for Jim the marginal benefit (MB) of producing is $60 and that the marginal cost (MC) of producing is$10. Suppose also that his marginal benefit of stealing is $50 and the marginal cost of stealing is $10. Is Jim currentlymaximizing utility in terms of producing and stealing? If not, should he produce more and steal less, or produce less andsteal more to move toward utility maximization?a. Yes, Jim is maximizing utility.b.No, Jim is not maximizing utility. Since the MB/MC ratio for producing is less thanthe MB/MC ratio for stealing, Jim should produce more and steal less.c. No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greaterthan the MB/MC ratio for stealing, Jim should produce more and steal less.d.No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greaterthan the MB/MC ratio for stealing, Jim should steal more and produce less.ANSWER:c
2. Suppose that for Alicia the marginal benefit (MB) of producing is $75 and that the marginal cost (MC) of producing is$5. Suppose also that her marginal benefit of stealing is $85 and the marginal cost of stealing is $5. Is Alicia currentlymaximizing utility in terms of producing and stealing? If not, should she produce more and steal less, or produce less andsteal more to move toward utility maximization?d
3. Which of the following statements is true?c

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Term
Spring
Professor
BassamY.Yousif
Tags
Macroeconomics, Government, Public Good, Market failure, Externality

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