If Mr Smith Thinks the Last Dollar Spent on Shirts Yields

question 206

Multiple Choice

If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should

• A) decrease his spending on cola.
• B) decrease his spending on cola and decrease his spending on shirts.
• C) decrease his spending on shirts.
• D) increase his spending on cola and decrease his spending on shirts.

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Definitions:

Trade-Offs

The balance achieved between two desirable but incompatible features; a compromise or the act of giving up one benefit to gain another.

Positive Statement

An objective statement based on factual claims, describing the world as it is without imbuing personal preferences or prescriptions.

Economic Majors

Students who are pursuing an academic degree or course of study focused on economics.

Seatbelts

Safety devices designed to secure the occupants of a vehicle against harmful movement that may result during a collision or a sudden stop.