Assume That a College Student Purchases Only Ramen Noodles and Textbooks

question 32

Multiple Choice

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with an increase in the price of a textbook will result in

• A)a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
• B)a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles.
• C)an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles.
• D)an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.

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Definitions:

Cash Disbursements

The outflow of cash for expenses, purchases, or investments by a business, recorded in the cash disbursements journal.

Manufacturing Overhead Budget

An estimate of the total costs associated with the indirect production activities, excluding direct materials and direct labor, for a certain period.

Direct Labor-Hour

A measurement unit for the amount of work or labor force contribution directly involved in manufacturing a product, typically expressed in hours.

Predetermined Overhead Rate

An estimated overhead rate calculated before the accounting period begins, used to allocate overhead costs to products or services.