Suppose a Consumer's Level of Satisfaction Is Given by AB2

question 35

Multiple Choice

Suppose a consumer's level of satisfaction is given by AB2 and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional) of A and B, how many units of A and B should he/she purchase?

• A)2 units of A and 4 units of B.
• B)4 units of A and 3 units of B.
• C)6 units of A and 2 units of B.
• D)0 units of A and 5 units of B.

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Definitions:

Cost Of Labor

The total sum of all compensation that a business must pay to its employees for a set period or on a given project.

Cost Of Capital

The expense incurred by an entity to fund its operations and growth, typically comprising interest on debt and dividends on equity.

Cost Of Labor

The total amount paid to employees for their work, including wages, benefits, and any other compensation.

Isocost Line

A graph line representing all combinations of inputs that have the same total cost for a firm.