Assume That Product Alpha and Product Beta Are Both Priced

question 242

Multiple Choice

Assume that product Alpha and product Beta are both priced at $1 per unit and that Ellie has $20 to spend on Alpha and Beta. She buys 8 units of Alpha and 12 units of Beta. The marginal utility of Alpha is 40 and the marginal utility of Beta is 20. This indicates that

• A)Ellie should make no change in consumption.
• B)given another dollar, Ellie should buy an additional unit of Beta.
• C)in order to maximize utility, Ellie should buy more of Beta and less of Alpha.
• D)in order to maximize utility, Ellie should buy more of Alpha and less of Beta.

---

Definitions:

Contractual Interest Rate

The agreed-upon interest rate specified in a loan or bond contract, which the borrower must pay to the lender.

Market Interest Rate

The prevailing rate of interest determined by supply and demand in the financial markets.

Straight-Line Method

A method of depreciation that allocates an equal amount of the depreciable cost of an asset to each year of its useful life.

Carrying Value

The net amount at which an asset or liability is reported on the balance sheet, calculated as original cost minus any depreciation, amortization, or impairment costs.