Figure 21-19 The Following Graph Illustrates a Representative Consumer's Preferences for Marshmallows

question 66

Multiple Choice

Figure 21-19
The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies:

-Refer to Figure 21-19.Assume that the consumer has an income of $40.If the price of chocolate chips is $4 and the price of marshmallows is $4,the optimizing consumer would choose to purchase

• A) 9 marshmallows and 6 chocolate chips.
• B) 10 marshmallows and 10 chocolate chips.
• C) 5 marshmallows and 5 chocolate chips.
• D) 3 marshmallows and 9 chocolate chips.

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Definitions:

Fixed Expenses

Expenses that do not change with the level of production or sales within a certain range and period, such as rent, salaries, and insurance.

Break-Even Sales

The amount of sales revenue needed to cover all fixed and variable costs, resulting in no profit or loss.

Variable Production Costs

Costs that fluctuate directly with the level of output, including materials, labor, and other expenses that vary with production volume.

Fixed Cost

Expenses that remain constant in total regardless of changes in the level of production or sales volume, such as rent, salaries, and insurance.