Assume a Consumer Is Currently Purchasing a Combination of Goods,X

question 48

Multiple Choice

Assume a consumer is currently purchasing a combination of goods,X and Y,that maximizes her utility given her budget constraint,i.e.,MRSX,Y = PX/PY.Now assume that there is a decrease in the price of Y.In this case,to once again maximize her utility,the consumer will want to adjust her purchases of X and Y such that:

• A)the marginal rate of substitution of X for Y, i.e., MRSX,Y, decreases.
• B)the marginal rate of substitution of X for Y, i.e., MRSX,Y, stays the same.
• C)the marginal rate of substitution of X for Y, i.e., MRSX,Y, increases.
• D)none of the above. The consumer will continue to maximize her utility after the price change by continuing to consume the same combination of X and Y.

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Definitions:

Carrying Amount

Carrying amount, also known as book value, is the value recorded on the balance sheet for a particular asset, reflecting its original cost minus any depreciation, amortization, or impairment costs.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against an asset over its useful life.

Impairment Loss

An impairment loss occurs when the carrying amount of an asset exceeds its recoverable amount, indicating the asset is not expected to generate future benefits worth its recorded value.

Accumulated Depreciation

The total amount of depreciation expense allocated to an asset since it was put into use.