Suppose You Could Quantify the Amount of Satisfaction You Receive

question 168

Multiple Choice

Suppose you could quantify the amount of satisfaction you receive from consuming ice cream in money terms.You might say,"I expect to get $3 worth of satisfaction from this ice cream cone." According to traditional economic theory,if the price of this ice cream cone were $3.05,would you buy one?

• A) Sure, why not? What's a nickel?
• B) Absolutely. It's worth it at that price.
• C) No way, because it's not worth it.
• D) There is no way to answer this question because you really can't compare the price of something and the amount of satisfaction you expect to receive from it.

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Definitions:

Unit Variable Cost

The cost associated with producing one additional unit of product, including materials, labor, and other variable costs.

Fixed Costs

Overheads like rent, salaries, and insurance that stay the same, irrespective of how much is produced or sold.

Break-Even

The point at which total costs equal total revenues, resulting in no net loss or gain for a business.

Variable Cost

Costs that vary directly with the level of production or volume of output.