Figure: Harold's Indifference Curves the Figure Shows Three of Harold's

question 356

Multiple Choice

Figure: Harold's Indifference Curves The figure shows three of Harold's indifference curves for bread and cheese. (Figure: Harold's Indifference Curves) Look at the figure Harold's Indifference Curves.If the price of bread is $2 per loaf, the price of cheese is $2, and Harold has $10 to spend on bread and cheese, what is Harold's optimal consumption bundle of bread and cheese?

• A)6 loaves of bread and 4 pounds of cheese
• B)4 loaves of bread and 3 pounds of cheese
• C)3 loaves of bread and 2 pounds of cheese
• D)2 loaves of bread and 8 pounds of cheese

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Definitions:

Transaction

The act of conducting a trade or business deal involving the exchange of goods, services, or financial assets.

Signaling

A concept in economics and finance where agents indirectly convey information about their qualities or intentions through their actions.

Liquidity

With respect to a company, the ability to pay its bills in the short run. With respect to an asset, the readiness with which it can be converted to cash.

Matching Savers

A concept in finance referring to the alignment of investors' preferences with appropriate investment opportunities.