Say a Consumer Is Choosing Between Red Wine and White

question 39

Multiple Choice

Say a consumer is choosing between red wine and white wine. The price of red wine is 20 and the price of white wine is 10. If the marginal rate of substitution is 1, and if red wine is on the horizontal axis then the consumer is purchasing:

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

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Definitions:

Bearer Instrument

A type of financial security that is payable to the holder or presenter of the document.

Endorsement

An amendment or addition to an existing document or policy, especially in the context of insurance, or it can also mean the act of publicly supporting a product, service, or person.

Transferable

Characteristic of an asset or right that allows it to be passed from one party to another, often through sale or trade.

Purpose

The reason for which something is done or created, or for which something exists; intent or objective.