Table 10-5 -Refer to Table 10-5, Which Lists the Values of Harry

question 245

Multiple Choice

Table 10-5

-Refer to Table 10-5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos.Assume that the price of a sub sandwich is $4 and the price of a taco is $2.When Harry's income is $14, he buys two Italian sub sandwiches and three tacos.The last column lists the values of the marginal utility per dollar for tacos when the price of a taco decreases to $1.Complete this statement: As a result of the change in price,

• A)Harry's purchasing power has increased. He will reduce his consumption of tacos so he can buy one more sub. This is an example of the substitution effect of a price change.
• B)Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy fewer tacos. This is an example of the income effect of a price change.
• C)Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy more tacos. This is an example of the income effect of a price change.
• D)Harry's purchasing power has increased. Harry buys fewer tacos. This is an example of the substitution effect of a price change

---

Definitions:

Depreciable Asset

A tangible or intangible asset subject to depreciation, representing its loss in value over time due to usage or obsolescence.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset over its useful life, reducing its initial cost to its current book value.

Book Value

The value of an asset as recorded on a company's balance sheet, calculated as its cost minus accumulated depreciation.

Adjusting Entry

An accounting journal entry made to update the accounts and reflect the correct financial position before financial statements are prepared.