Figure 21-20 The Following Graph Illustrates a Representative Consumer's Preferences for Marshmallows

question 232

Multiple Choice

Figure 21-20
The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies:
-Refer to Figure 21-20. Assume that the consumer has an income of $100 and currently optimizes at bundle A. When the price of marshmallows decreases to $5, which bundle will the optimizing consumer choose?

• A)A
• B)B
• C)C

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Definitions:

Different Prices

Different prices refer to varying costs for goods or services, often based on factors such as location, demand, and quality.

Markets

Systems, institutions, procedures, social relations, and infrastructures whereby parties engage in exchange, buying and selling goods, services, or information.

Third-Degree Price Discrimination

A pricing strategy where a seller charges different prices to different customer groups based on attributes like age, location, or income.

Profit-Maximizing Monopolist

A single seller in a market who determines the optimal level of output and price to maximize profits, facing no competition.