Joseph Chooses a Combination of Apples and Oranges Along His

question 341

Multiple Choice

Joseph chooses a combination of apples and oranges along his budget line. The marginal rate of substitution of apples for oranges is 2, the price of an apple is $0.50, and the price of an orange is $1.50. Joseph:

• A) is maximizing total utility.
• B) should consume more apples and fewer oranges to maximize total utility.
• C) should consume fewer apples and more oranges to maximize total utility.
• D) may or may not be maximizing total utility.

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Definitions:

Accounts Payable

Liabilities representing amounts owed to creditors for goods and services the company has received but not yet paid for.

Raw Materials Purchases

is the total cost of raw materials bought for production during a given period.

Direct Materials Purchase Budget

A financial plan that estimates the cost and quantity of raw materials required for production in a specific period.

Ending Inventories

The value of goods available for sale or use at the end of an accounting period.