Suppose a Consumer Buys Two Goods $x$ And $y$ , and Has Income Of

question 63

Multiple Choice

Suppose a consumer buys two goods, $x$ and $y$ , and has income of $\$ 30$ . Initially $P _ { x } = 3$ and $P _ { y } =$ 3 and the consumer chooses basket $A$ with $x = 5$ and $y = 5$ . The prices change to $P _ { x } = 4$ and $P _ { y } = 2$ and the consumer chooses basket $B$ with $x = 1$ and $y = 13$ .

• A) These choices are consistent with utility maximization.
• B) These choices are not consistent with utility maximization.
• C) With this information it is not possible to determine if these choices are consistent with utility maximization.
• D) Basket \(B\) must be strictly preferred to basket \(A\).

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Definitions:

Sinking Funds

A type of savings account or fund that is set up to repay debt or an outstanding loan, making periodic payments into the fund for this purpose.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell the products, and collect cash from the sales.

Maturity Value

The total amount payable to an investor at the end of a bond's term, including both the principal and the interest.

Bonds

Fixed-income investments representing loans made by an investor to a borrower, typically corporate or governmental.