A Big Mac Meal Costs $3

question 17

Multiple Choice

A Big Mac meal costs $3.00 and gives you an additional 5 units of utility; a meal at the Four Seasons Hotel costs $27.00 and gives you an additional 45 units of utility. Based only on the information you have, using the theory of rational choice, you most likely would:

• A) choose to eat the Big Mac meal.
• B) choose to eat at the Four Seasons Hotel.
• C) be indifferent between eating the Big Mac and eating at the Four Seasons Hotel.
• D) decide that eating at the Four Seasons Hotel is preferable because though the marginal utilities of both meals are the same, the total utility is greater in the case of the meal at the Four Seasons Hotel.

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Definitions:

Limited Production

A manufacturing strategy where the quantity produced is restricted typically due to scarcity of resources, specialized demand, or strategic choice.

Incremental Costs

The additional costs incurred if a company increases its production or level of operations.

Direct Materials

Raw materials directly used in the production of goods, easily traceable to the product being manufactured.

Operating Income

The profit realized from a business's core operations after deducting operating expenses such as wages and cost of goods sold, but before taxes and interest.