Suppose the Price Of $A$ Is $\$ 20$ , the Price Of $B$

question 28

Multiple Choice

Suppose the price of $A$ is $\$ 20$ , the price of $B$ is $\$ 10$ , and that the consumer is currently spending all available income. At the consumer's current consumption basket the marginal utility of $A$ is 6 and the marginal utility of $B$ is 4 .

• A) The consumer is currently maximizing utility.
• B) The consumer could increase utility by consuming more of good \(A\) and less of \(\operatorname { good } B\).
• C) The consumer could increase utility by consuming more of good \(B\) and less of \(\operatorname { good } A\).
• D) Nothing can be said about the consumer's utility because we do not know the consumer's income or utility function.

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Definitions:

Repaid

The act of paying back money that was borrowed from a person, bank, or financial institution.

Interest Rate

The ratio at which interest is applied to money loaned by a borrower from a lending party.

Compounded Semi-annually

A financial term indicating the interest on an investment is calculated and added to the principal balance twice every year, enhancing the total return over periods.

Obligation

A duty or commitment to pay money or perform some action.