Harry Has $10 to Spend on Cans of Coke and Pepsi

question 22

Multiple Choice

Harry has $10 to spend on cans of Coke and Pepsi, which he regards as perfect substitutes, one for one. Pepsi costs $.50 a can and Coke costs $.60 a can. Harry has 20 coupons, each of which can be used to buy 1 can of Coke for $.40. Which of the following bundles will Harry buy?

• A) 20 cans of Pepsi and no Coke
• B) cans of Coke and no Pepsi
• C) 10 cans of Coke and 8 cans of Pepsi
• D) 10 cans of Coke and 12 cans of Pepsi
• E) None of the above.

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Definitions:

Average Variable Cost

The total variable cost of production divided by the quantity of output produced, representing the average cost of each unit of output when only variable costs are considered.

Cost-Minimizing Firm

A business entity that seeks to achieve production at the lowest possible cost.

Production Function

A mathematical representation that identifies the relationship between input resources and the output of goods or services for a business or economy.

Cookie Factory

A specific type of manufacturing plant or production facility where cookies are produced on a large scale.