Suppose at the Consumer's Current Consumption Bundle the Marginal Rate

question 97

Multiple Choice

Suppose at the consumer's current consumption bundle the marginal rate of substitution of cheese for wine is 1/2 bottle of wine per pound of cheese. The price of one pound of cheese is $6, and the price of a bottle of wine is $10. The consumer should increase his consumption of

• A)cheese, decrease his consumption of wine, and move to a lower indifference curve.
• B)cheese, decrease his consumption of wine, and move to a higher indifference curve.
• C)wine, decrease consumption of cheese, and move to a higher indifference curve.
• D)cheese, decrease consumption of wine, and remain on the same indifference curve.

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Definitions:

Denominator Activity

A term used in cost accounting to refer to the level of activity used to allocate fixed costs to cost units.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead based on hours worked and the standard cost of variable overhead for those hours, indicating efficiency in controlling variable overhead costs.

Variable Manufacturing Overhead Cost

The portion of manufacturing costs that varies with the level of production output, including costs such as indirect materials and utilities.

Standard Hours Allowed

The amount of time that should be taken to complete a specific amount of work, according to predefined standards.