Bernice in Problem 5 Has the Utility Function U(x, Y)

question 29

Multiple Choice

Bernice in Problem 5 has the utility function u(x, y) = min{x, y}, where x is the number of pairs of earrings she buys per week and y is the number of dollars per week she has left to spend on other things. (We allow the possibility that she buys fractional numbers of pairs of earrings per week.) If she originally had an income of $20 per week and was paying a price of $2 per pair of earrings, then if the price of earrings rose to $5, the compensating variation of that price change (measured in dollars per week) would be closest to

• A) $20.
• B) $41.
• C) $40.
• D) $10.
• E) $39.

Grasp the concept of demand elasticity and its impact on pricing strategies.

Comprehend how consumer income levels affect buying power and demand.

Identify the characteristics of different competitive markets and how they influence pricing and demand.

Understand the role of demand curves in visualizing price and quantity relationships.

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Definitions:

Material Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, multiplied by the standard cost per unit.

Standard Costing

An accounting method that uses predetermined costs for product costing, performance evaluation, and decision making.

Labour Efficiency Variance

A metric that measures the difference between the actual labor hours used in production and the standard or expected hours, often indicating labor performance.

Variable Overhead

Indirect production costs that fluctuate with the level of production output, such as utilities for the manufacturing plant.