Danny Has $12 to Spend on Two Goods: Pies and Pop.The

question 4

Multiple Choice

Danny has $12 to spend on two goods: pies and pop.The price of a pie is $4,and the price of a can of pop is $2.To maximize his utility,Danny buys

• A)2 pies and 2 cans of pop.
• B)3 pies and no pop.
• C)the combination that gives him the same marginal utility per dollar on pies as on pop.
• D)6 cans of pop and no pie.
• E)the combination that gives him the same total utility from pies as from pop.

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Definitions:

Purely Competitive Industries

Industries in which many firms sell identical products to many buyers and no single seller can influence the market price.

Economic Losses

The difference when total costs, including both explicit and implicit costs, exceed total revenues, indicating that resources could be better employed elsewhere.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing excess returns over the firm's opportunity costs.

Purely Competitive Market

A trading environment with a large number of consumers and providers, barrier-free entrance and departure, and a standardized product.