Bobby Consumes Only Chocolate Ice Cream and Vanilla Ice Cream

question 308

Multiple Choice

Bobby consumes only chocolate ice cream and vanilla ice cream. He is spending all of his income. His marginal utility of chocolate is 100 and his marginal utility of vanilla is 200, and the price of chocolate is $1.00 per scoop and the price of vanilla is $2.00 per scoop. To maximize his utility, Bobby should

• A) buy more chocolate ice cream and less vanilla ice cream.
• B) buy more vanilla ice cream and less chocolate ice cream.
• C) not change his purchases between chocolate ice cream and vanilla ice cream.
• D) buy no chocolate ice cream.

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Definitions:

Income Statement

A financial statement showing a firm’s revenues and expenses during a specified period.

Profitability

A measure of the efficiency and effectiveness of a company's operations, indicated by its ability to generate income from its activities.

Summary

A brief statement or account of the main points of something, often used to provide a quick understanding or overview.

Accounting Statements

Financial reports that provide a summary of a company’s financial condition, including income statement, balance sheet, and cash flow statement.