Suppose You Own a Courier Service and You Use Two

question 28

Multiple Choice

Suppose you own a courier service and you use two types of delivery vehicles - Model A,which costs $30 000 to purchase,and Model B,which costs $50 000 to purchase.You have a budget of $300 000 for the purchase of new vehicles.Which of the following statements best describes the shape of your budget line?

• A)The budget line is concave to the origin,indicating that the opportunity cost of each model of vehicle increases with each additional unit purchased.
• B)The budget line is convex to the origin,indicating that the opportunity cost of each vehicle decreases with each additional unit purchased.
• C)The budget line is a straight line,indicating that the opportunity cost of each vehicle decreases with each additional unit purchased.
• D)The budget line is a straight line,indicating that the opportunity cost of each model of vehicle is independent of how many are purchased.
• E)The budget line is a straight line,indicating that the opportunity cost of each vehicle increases with each additional unit purchased.

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