The Consumer's Budget Constraint Is $6 = 0

question 33

Multiple Choice

The consumer's budget constraint is $6 = 0.50G + P, where G is packs of gum and P is bags of pretzels. The marginal utility of pretzels is MU_P = G^0.5, and the marginal utility of gum is MU_G = 0.5G^-0.5P. The consumer's utility function is U = G^0.5P. the utility-maximizing bundle consists of _____ packs of gum and _____ bags of pretzels.

• A) 8; 2
• B) 4; 4
• C) 2; 5
• D) 6; 3

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Definitions:

Budget Variance

The difference between the budgeted or planned amount and the actual amount spent or received.

Predetermined Overhead Rate

A rate calculated at the beginning of a period, used to apply manufacturing overhead costs to products based on a chosen activity base such as machine-hours or labor-hours.

Variable Component

Variable Component refers to the part of total costs or expenses that changes in proportion to changes in the volume of activity or production levels.

Fixed Component

In cost accounting, this refers to costs that do not change with the level of production or sales, such as rent and salaries.