Use the Following to Answer Questions

question 327

Multiple Choice

Use the following to answer questions:
-(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average fixed cost of 2 cakes?

• A) $5
• B) $10
• C) $25
• D) $30

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, contrary to normal goods.

Normal Good

A good for which demand increases as the income of consumers increases and vice versa, all else being constant.

WARP

WARP, or the Weak Axiom of Revealed Preference, is an economic principle stating that if a consumer chooses one bundle of goods over another when both are available, then they will not choose the second bundle when the first one remains available.

Perfect Complements

Goods that are always consumed together in fixed proportions because their consumption provides utility only when combined, such as left and right shoes.