Consider the Indifference Curve Map and Budget Constraint for Two

question 179

Multiple Choice

Consider the indifference curve map and budget constraint for two goods,beef and potatoes.Suppose the good on the horizontal axis,potatoes,is a Giffen good.Beef is measured on the vertical axis and is a normal good.When the price of potatoes increases,

• A) the substitution effect causes an increase in the consumption of potatoes,and the income effect causes a decrease in the consumption of potatoes.The substitution effect is less than the income effect.
• B) the substitution effect causes a decrease in the consumption of potatoes,and the income effect causes an increase in the consumption of potatoes.The substitution effect is greater than the income effect.
• C) the substitution effect causes an increase in the consumption of potatoes,and the income effect causes a decrease in the consumption of potatoes.The substitution effect is greater than the income effect.
• D) the substitution effect causes a decrease in the consumption of potatoes,and the income effect causes an increase in the consumption of potatoes.The substitution effect is less than the income effect.

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Definitions:

DLH

The hours of work performed by workers directly involved in the manufacturing process, serving as a basis for allocating labor costs.

Volume Variance

The difference between the expected volume of production or sales and the actual volume, affecting costs or revenues.

Variable Overhead Efficiency Variance

A calculation used to measure the efficiency with which a firm uses its variable overhead resources, based on the difference between actual and expected usage.

Unfavorable

A term describing outcomes that are worse than expected or budgeted, often used in financial and operational analysis.