Suppose the Only Two Goods That Charlie Consumes Are Wine

question 377

Multiple Choice

Suppose the only two goods that Charlie consumes are wine and cheese. When wine sells for $10 a bottle and cheese sell for $10 a pound, he buys 6 bottles of wine and 4 pounds of cheese - spending his entire income of $100. One day the price of wine falls to $5 a bottle and the price of cheese increases to $20 a pound, while his income does not change. The bundle of wine and cheese that he purchased at the old prices now costs

• A)the same amount at the new prices.
• B)less than Charlie's income at the new prices.
• C)more than Charlie's income at the new prices.
• D)We do not have enough information to answer the question.

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Definitions:

Private-Sector Differential

The differences in wages, working conditions, and employment benefits between jobs in the private sector versus those in the public sector.

Globalization

The process of increased interconnectedness and interdependence among countries, mainly through trade, investment, and cultural exchange.

Two-Tiered Wage

A pay scale system that offers a higher wage tier for current employees and a lower wage tier for new hires for the same job.

Monopoly Power

The ability of a single seller to influence the price and production levels in the market.