Suppose Caesar Allocates His Entire Budget to the Purchase of Soft

question 109

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.

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Definitions:

External Review

An evaluation or assessment conducted by individuals or entities outside of an organization to ensure objectivity and impartiality, often focusing on processes, products, or financial health.

Framing Bias

A cognitive bias where people react differently to a particular choice depending on how it is presented, such as a loss or gain.

Risk-Averse

A tendency to avoid taking risks, preferring safer or more predictable outcomes over uncertainty.

Risk-Seeking

characterizes the tendency of an individual or entity to take decisions that have a significant level of uncertainty or potential for negative outcomes in the hope of achieving higher gains.