Alexandra Consumes Only Caviar and Champagne, but She Does Have

question 39

Multiple Choice

Alexandra consumes only caviar and champagne, but she does have a limited income of $400. Her current consumption choice is 5 ounces of caviar, at a price of $50 per ounce, and 6 bottles of champagne, at $25 each. The last ounce of caviar added 100 units to Alexandra's total utility, while the last bottle of champagne added 75 units. If Alexandra chooses 4 ounces of caviar and 8 bottles of champagne instead:

• A) her total utility will increase by 150 units
• B) her total utility will decrease by 150 units
• C) her total utility will increase by 100 units
• D) her total utility will decrease by 100 units
• E) her total utility will increase by 50 units

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Definitions:

Interest Rate

The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage of the loan's outstanding balance.

Consumption

The act of households consuming both goods and services.

Endowment

The total resources owned or provided by an entity, including tangible and intangible assets.

Intertemporal Indifference Curve

A graphical representation showing different combinations of consumption at two different points in time among which a consumer is indifferent, reflecting time preferences for consumption.