If Px = Py, Then When the Consumer Maximizes Utility

question 85

Multiple Choice

If Px = Py, then when the consumer maximizes utility,

• A) X must equal Y.
• B) MU(X) must equal MU(Y).
• C) MU(X) may equal MU(Y), but it is not necessarily so.
• D) X and Y must be substitutes.

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Definitions:

Estimating Inventories

The process of approximating the quantity and value of inventory a business has on hand.

Gross Profit Method

A technique to estimate inventory cost by using the gross profit margin, often used when physical inventory counts are impractical.

Financial Statement Effects

The impact of transactions on the financial statements, affecting the balance sheet, income statement, and cash flow statement.

Ending Inventory Overstatement

This occurs when the reported amount of inventory at the end of a period is higher than its actual value, which can distort financial statements.