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13 December, 21:35

Alexandra is maximizing her utility over goods x and y subject to her budget constraint. Her preferences are smooth (maximizers are always interior). At her optimal consumption bundle, her MRS of goof y for good x is equal to 1. The price of good x is $4. What is the price of good y?

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  1. 13 December, 21:54
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    Answer: $4

    Explanation: The optimization ratio between good x and y is the same.

    In other words. Alexandra is maximizing her utility over goods x and y subject to her budget constraint at constant ratio. This is from the fact that At her optimal consumption bundle, her MRS of goof y for good x is equal to 1.
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