In the Economy of Mungo, There Is a Third Person

question 2

Multiple Choice

In the economy of Mungo, there is a third person called Ike.Ike has a red income of 88 and a blue income of 30.Recall that blue prices are 1 bcu (blue currency unit) per unit of ambrosia and 1 bcu per unit of bubble gum.Red prices are 2 rcus (red currency units per unit of ambrosia and 6 rcus per unit of bubble gum.You have to pay twice for what you buy, once in red currency, once in blue currency.If Ike spends all of his blue income but not all of his red income, he must consume

• A)at least 23 units of ambrosia.
• B)exactly twice as much bubble gum as ambrosia.
• C)at least 17 units of bubble gum.
• D)at least 7 units of bubble gum.
• E)equal amounts of ambrosia and bubble gum.

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Definitions:

Opportunity Cost

Forgoing the potential gains from various choices by settling on one option.

Supplying Division

The unit or segment within a larger organization responsible for providing materials, products, or services to another division or department.

Transfer Price

The price charged for goods and services transferred between departments or divisions of the same company or between related entities.

Buying Division

A department within a company responsible for purchasing goods, materials, and services required for the business operations.