A Consumer Currently Spends a Given Budget on Two Goods

question 29

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 10 and the marginal utility of Y is 8. The unit price of X is $5 and the unit price of Y is $2. The utility-maximizing rule suggests that this consumer should

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

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Definitions:

Confidence Interval

Re-formulated: An estimate expressing the degree of uncertainty or certainty in a sampling method.

Mean

The average of a set of numbers, calculated by dividing the sum of these numbers by the count of numbers.

Confidence Interval

A selection of values from sample-related statistics, presumed to hold the value of an undetermined population characteristic.

Population Mean

The average of a set of characteristics (e.g., measurements, counts) of the entire population.