A Consumer Currently Spends a Given Budget on Two Goods

question 345

Multiple Choice

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 12 and the marginal utility of Y is 8. The unit price of X is $3 and the unit price of Y is $4. The utility-maximizing rule suggests that this consumer should

• A)decrease consumption of product X and increase consumption of product Y.
• B)decrease consumption of product X and decrease consumption of product Y.
• C)decrease consumption of product Y and increase consumption of product X.
• D)stick with the current consumption mix because it yields maximum utility.

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Definitions:

Contractual Defenses

Legal arguments that can be used to challenge the enforceability of a contract, such as incapacity, duress, or fraud.

Surety Relationships

A legal arrangement where a third party (the surety) agrees to take responsibility for the debt or obligation of a borrower if the borrower defaults.

Modification

An alteration or change to an existing agreement or contract.

Surety Agreement

A legal contract where one party (the surety) guarantees the performance, obligations, or debts of another party (the principal) to a third party (the obligee).