A Consumer Is Making Purchases of Products Alpha and Beta

question 334

Multiple Choice

A consumer is making purchases of products Alpha and Beta such that the marginal utility of product Alpha is 63 and the marginal utility of product Beta is 40. The price of product Alpha is $9, and the price of product Beta is $5. The utility-maximizing rule suggests that, to stay within a given budget constraint, this consumer should

• A)increase consumption of product Alpha and decrease consumption of product Beta.
• B)increase consumption of product Beta and increase consumption of product Alpha.
• C)increase consumption of product Beta and decrease consumption of product Alpha.
• D)make no change in the consumption of Alpha or Beta.

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Definitions:

Ownership Interest

The possession of rights, control, and benefits of ownership in property or a company by an individual or entity.

Land

An area of the earth's surface, including its resources and physical environment, which can be owned or used.

Life Estate

An ownership interest in which the holder has the right to possess the property until his or her death.

Waste

The improper use, consumption, or destruction of property, especially in relation to real estate, that significantly reduces its value.