Suppose the Price of a Soda Is $2 Each, the Price

question 29

Multiple Choice

Suppose the price of a soda is $2 each, the price of a hot dog is $3 each and the budget is $20. If the marginal utility of the fourth soda is 100 and the marginal utility of the fourth hot dog is 150, to maximize utility, a person will buy

• A) 4 sodas and 4 hot dogs.
• B) more hotdogs than 4 and fewer sodas than 4 because hot dogs provide more utility.
• C) more sodas than 4 to increase their utility.
• D) fewer sodas than 4 and more hot dogs than 4.

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Definitions:

Status Quo Pricing

A pricing strategy where prices are set similar to competitors or kept the same over time to maintain the existing market position.

Pricing Structure

The strategic arrangement of prices within a company's portfolio of products or services, aimed at achieving financial goals and market competitiveness.

Fares

The prices paid for journeys on public transportation like buses, trains, and airplanes.

Break-Even Point

The point at which the number of units sold generates just enough revenue to equal the total costs; at this point, profits are zero.