This Graph Shows One Consumer's Demand for Ice Cream at the Student

question 47

Multiple Choice

This graph shows one consumer's demand for ice cream at the student union:
Joe is one of the students whose demand is shown.Joe buys more ice cream when the price is $2.00 than when the price is $3.00 because

• A) Joe cannot afford $3.00 for a scoop of ice cream.
• B) Joe has more consumer surplus when price is $3.00.
• C) the marginal utility Joe gets from his fifth scoop of ice cream is less than the marginal utility Joe gets from other things that cost $3.00.
• D) Joe does not experience diminishing marginal utility for ice cream consumption when it is only $2.00 per scoop but does when it is $3.00.

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Definitions:

Opportunity Cost

The loss of potential gain from other alternatives when one option is chosen.

Cost Formula

An equation or method used to determine the total cost of producing goods or services, combining fixed costs, variable costs, and sometimes semi-variable costs.

Variable Selling Expenses

Costs that vary directly with the volume of sales, such as commissions and shipping fees.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much revenue is available to cover fixed expenses and to contribute to profit.