Suppose a Consumer Is Spending All of His/her Income on Two

question 226

Multiple Choice

Suppose a consumer is spending all of his/her income on two goods, A and B, in a manner where MU_a = 15 and MU_b = 80, and the P_a = $5 and the P_b = $20. Then the consumer:

• A) is maximizing his/her utility.
• B) should increase his/her purchases of B and decrease the purchases of A.
• C) should spend more money on both goods.
• D) should spend less money on both goods.
• E) should increase the purchases of A and decrease the purchases of B.

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Definitions:

Remediate

The process of correcting or improving deficiencies or problems.

Cohesion

The degree to which members of a group or team are united in pursuing common goals and how well they stick together.

One-Dimensional

Lacking depth or complexity; containing only one aspect or dimension.

Affective

Relating to moods, feelings, and attitudes; the emotional aspect of consciousness as opposed to cognitive or behavioral aspects.