Use the Figure Below to Answer the Following Question

question 17

Multiple Choice

Use the figure below to answer the following question.

Figure 9.2.4
-Refer to Figure 9.2.4. Rashid buys only books and albums. The figure shows his preferences. Rashid's indifference curves ________ display diminishing marginal rate of substitution because ________.

• A)do; Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books
• B)do not; the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books
• C)do not; Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books
• D)do; the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books
• E)do; the price of an album decreases as Rashid increases the quantity he buys

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Definitions:

Flexible Budget

A dynamic budget that changes according to the business activity levels, offering a more adaptable financial planning tool.

Level of Activity

A measure of the volume of production or operations, often influencing cost behavior and used to allocate fixed costs to units of product.

Revenue Variance

The difference between the actual revenue earned and the budgeted or expected revenue.

Static Planning Budget

A budget based on a single level of output, not adjusted for changes in activity levels.