Say a Consumer Is Choosing Between Wine and Cheese

question 40

Multiple Choice

Say a consumer is choosing between wine and cheese.The price of wine is 10 and the price of cheese is 5.If the marginal rate of substitution is 4, and if wine is on the horizontal axis and cheese is on the vertical axis then the consumer is purchasing:

• A)Too much cheese
• B)Too much wine
• C)Just the right amount of both goods
• D)Purchasing more than what her income would allow

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Definitions:

Economic Consultant

A professional who provides expert advice on economic policies, market analysis, and financial strategies.

Loss-Minimizing Strategy

An approach aimed at reducing the amount of loss incurred in a business or investment.

AVC

The average variable cost is calculated by dividing the total variable costs by the produced output quantity.

Marginal Revenue

The increase in revenue that results from the sale of one additional unit of output.