Sally Devotes All of Her Income to the Consumption of Apples

question 66

Multiple Choice

Sally devotes all of her income to the consumption of apples and Reese's Peanut Butter Cups.At her current level of consumption,the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8.Assume that diminishing marginal utility applies to both apples and Reese's Peanut Butter Cups.Suppose the price of an apple is $0.20 and the price of a Reese's Peanut Butter Cup is $0.25.To maximize her total utility,assuming that the goods are divisible,she would:

• A)consume more Reese's Peanut Butter Cups and fewer apples.
• B)consume less of both goods.
• C)consume more apples and fewer Reese's Peanut Butter Cups.
• D)There is not enough information to justify a change in her current level of consumption.

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Definitions:

Equipment

Tools or machinery needed for a specific task or purpose.

Confrontative Exposure

A therapeutic practice where individuals confront their fears or traumas directly in a controlled environment to reduce sensitivity.

In Vivo

A term used to describe experiments or procedures performed or taking place in a living organism.

Flooding

A psychological technique used in behavior therapy, often for phobias, where the patient is exposed to an overwhelming amount of the anxiety-provoking stimulus in order to reduce the fear response.