Suppose Caesar Allocates His Entire Budget to the Purchase of Soft

question 75

Multiple Choice

Suppose Caesar allocates his entire budget to the purchase of soft drinks and chips.The marginal utility of the last bottle of soft drink purchased is 12 utils,and each bottle costs $1.20.The marginal utility of the last bag of chips purchased is 8 utils,and each bag costs $1.In order to maximize his utility,Caesar should

• A)Buy more soft drinks and fewer chips since he gets more marginal utility per dollar from soft drinks.
• B)Buy more chips and fewer soft drinks because of the lower price for chips.
• C)Buy more soft drinks and fewer chips because the soft drink has fewer calories.
• D)Not change anything because he has made the choice that gives him the most total utility.

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Definitions:

Rate of Return

The rise or fall in an investment's worth over a designated period, articulated as a percentage of the cost of the investment.

Natural Monopolies

Natural monopolies occur in industries where the costs of production are lowest when a single firm supplies all the output, such as utilities companies.

Welfare Loss

The decrease in economic efficiency that occurs when the optimal allocation of resources is not achieved, leading to a loss of total welfare.

Unregulated Monopoly

A market condition where a single company or entity exclusively controls a particular industry or service without any governmental restrictions or oversight.