-Rick's Income Is $54 a Week and He Spends All

question 7

Multiple Choice

-Rick's income is $54 a week and he spends all of it on CDs and sandwiches. The price of a CD is $18 and the price of a sandwich is $3. The figure above illustrates Rick's preferences. What is Rick's best affordable combination of CDs and sandwiches?

• A) 2 CDs and 8 sandwiches a week
• B) 3 CDs a week and no sandwiches
• C) 1 CD and 12 sandwiches a week
• D) 3 CDs and 6 sandwiches a week

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Definitions:

Marginal Cost

The supplementary expenditure brought on by the creation of one more unit of a good or service.

Total Variable Cost

The sum of all variable expenses that are incurred in the direct production of goods or services.

AVC

Average Variable Cost, which is the variable cost per unit of output.

Marginal Cost

The production cost for one more unit of a product.