Use the Information Below to Answer the Following Questions

question 105

Multiple Choice

Use the information below to answer the following questions.
Fact 9.3.1
Marc has an income of $20 and spends it on two goods,root beer (measured on the vertical axis) and chips (measured on the horizontal axis) .The price of root beer is $1 a can.The price of chips is $0.50 a bag.Initially,Marc chooses to consume 10 cans of root beer and 20 bags of chips.Then the price of root beer rises to $1.50 per can and the price of chips falls to $0.25 a bag.
-Refer to Fact 9.3.1.Marc's initial marginal rate of substitution was

• A)not calculable with the information given.
• B)equal to 2 cans of root beer given up for each bag of chips gained.
• C)equal to 1 can of root beer given up for each bag of chips gained.
• D)equal to 10 cans of root beer given up for each bag of chips gained.
• E)equal to 1/2 can of root beer given up for each bag of chips gained.

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Definitions:

Unit Variable Cost

The cost associated with producing one additional unit of a product, not including fixed costs.

Variable Cost

Costs that vary directly with the level of production or service activity, such as materials and labor costs, unlike fixed costs which remain constant regardless of activity levels.

Fixed Cost

Represents business expenses that remain constant regardless of the level of production or sales activity, such as rent, salaries, and insurance premiums.

Unit Variable Cost (UVC)

Variable cost expressed on a per unit basis for a product.