A Consumer Had Been Consuming Product X for Some Time

question 239

Multiple Choice

A consumer had been consuming product X for some time. This period, she buys fewer X in order to try some units of a new product Y. She finds that her marginal utility of X is 20 (at a price of $10 per unit) , while the marginal utility of Y is 36 (at a price of $12) . The utility-maximizing rule suggests that this consumer should

• A)increase consumption of product X because of its lower price.
• B)increase consumption of product X because it is an old reliable product.
• C)increase consumption of product Y because it has a higher MU/P.
• D)increase consumption of product Y because it has a higher MU.

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Definitions:

Boot Received

Cash or other property added to a transaction to even out the exchange, which can have tax implications for the recipient.

Computer Equipment

Tangible assets including computers, servers, and other technology-related hardware used in the operation of a business or for personal use, subject to depreciation.

Business Auto

A vehicle owned by a company and used for business operations, which can include transportation of goods, services, or employees.

Adjusted Basis

The original cost of a property adjusted for factors such as depreciation or improvements, used in calculating capital gains or losses for tax purposes.