Fred Consumes Quantities of Butter and Margarine; His Utility Function

question 31

Multiple Choice

Fred consumes quantities of butter and margarine; his utility function is given by U = 5M + 2B.If Fred has $10 to spend on butter and margarine,and if butter costs $2 per pound and margarine costs $1 per pound,what is his optimal bundle of butter and margarine?

• A) 3 butter and 4 margarine.
• B) 5 butter and 0 margarine.
• C) 0 butter and 10 margarine.
• D) 2 butter and 6 margarine.
• E) None of the above.

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Definitions:

Work in Process Inventory

The inventory that includes goods in the middle of the manufacturing process, not yet completed.

Manufacturing Overhead

Refers to all indirect costs associated with manufacturing a product, including costs related to factory equipment maintenance, utilities, and quality control.

Debit Side

The left side of an account in double-entry bookkeeping, used to record increases in assets, expenses, and losses or decreases in liabilities, equity, and revenue.

Overapplied Overhead

Occurs when the overhead allocated to products or services exceeds the actual overhead costs incurred.