The Price of a Hamburger Is $1, and the Price

question 150

Multiple Choice

The price of a hamburger is $1, and the price of a movie is $6. The consumer has purchased 2 hamburgers and 2 movies, and her marginal utility from the second hamburger is 20 and from the second movie is 120. The consumer has an income of $21. This combination of goods

• A) maximizes utility and is an optimum because the marginal utility of the last dollar spent on each good is the same.
• B) maximizes utility because the marginal utility of the last dollar spent on each good is the same, but it is not an equilibrium because marginal utility is not zero.
• C) is not an optimum because the consumer has not spent all of her money.
• D) is not an optimum because the marginal utility of the last dollar spent on each good is not the same.

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Definitions:

T-account

A graphic representation of a general ledger account, used for teaching, analysis, and informal record-keeping.

Direct Material

Raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the product's cost.

Indirect Material

Items used in the production process that do not become an integral part of the final product and are not easily traced to specific products, such as lubricants and cleaning supplies.

Unadjusted Cost of Goods Sold

The total cost directly associated with producing goods, not including any adjustments for inventory changes or operational costs.