A Consumer Currently Spends a Given Budget on Two Goods

question 29

Multiple Choice

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 10 and the marginal utility of Y is 8. The unit price of X is $5 and the unit price of Y is $2. The utility-maximizing rule suggests that this consumer should

• A)increase consumption of product X and decrease consumption of product Y.
• B)increase consumption of product X and increase consumption of product Y.
• C)increase consumption of product Y and decrease consumption of product X.
• D)stick with the current consumption mix because it yields maximum utility.

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Definitions:

Sale Of Investments

The process of liquidating investments such as stocks, bonds, or real estate, often to generate cash.

Statement Of Cash Flows

A financial report summarizing the total cash inflows from a company's operational activities and outside investments, alongside the cash outflows for paying off its business operations and investments within a specific timeframe.

Schedule

A plan that lists events, tasks, or activities along with their intended times and dates.

Noncash Investing

Refers to investment transactions that do not involve immediate cash flows, such as exchanging one asset for another or acquiring assets through the issuance of shares.