During a Study Session for an Economics Exam with Three

question 147

Multiple Choice

During a study session for an economics exam with three other students, Peter Daltry commented on an example of a consumer who had to decide the on number of slices of pizza and cups of Coca-Cola he would consume. Peter explained that "To maximize his utility this consumer must equate the marginal utility per dollar for pizza and Coca-Cola." Was Peter's analysis correct?

• A) Peter described one of the conditions necessary for utility maximization. The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola.
• B) Peter's statement is correct.
• C) Peter's statement is correct, but we must also assume that the consumer is rational.
• D) Peter describes one of the conditions necessary for utility maximization. The second condition is that total spending on both goods must equal the amount available to be spent.

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Definitions:

Per Se Violations

In law, actions or situations that are inherently illegal and do not require further proof of illegality or intent to enforce penalties.

Acceptable Practices

Established norms or standards of behavior that are considered to be appropriate and acceptable within a specific field or context.

Business Practices

The methods, strategies, and procedures employed by companies in the design, production, marketing, and sale of their products and services.

Sherman Act

A United States antitrust law passed in 1890 that outlaws monopolistic practices and promotes competition.