Use the information below to answer the following questions.
Fact 9.3.1
Marc has an income of $20 and spends it on two goods, root beer (measured on the vertical axis)and chips (measured on the horizontal axis).The price of root beer is $1 a can.The price of chips is $0.50 a bag.Initially, Marc chooses to consume 10 cans of root beer and 20 bags of chips.Then the price of root beer rises to $1.50 per can and the price of chips falls to $0.25 a bag.
-Refer to Fact 9.3.1.When the price of a bag of chips falls,Marc
A)will consume more beer, more chips, and be better off.
B)will consume less beer, more chips, and be better off.
C)will consume less beer, more chips, and be worse off.
D)will consume less beer, less chips, and be worse off.
E)consume more beer, less chips, and be better off.

Question

Quizplus · Accepted Answer

When the price of chips falls, it becomes relatively cheaper compared to root beer. Therefore, Marc will substitute some of his root beer consumption with chips consumption, thus consuming less root beer (10 cans to some lower number) and more chips (20 bags to some higher number). Since he preferred the bundle of chips and root beer to any other affordable bundle before, the lower price of chips will make him better off by allowing him to increase his consumption of chips without decreasing his consumption of root beer much.

Use the Information Below to Answer the Following Questions