Suppose That a Consumer Who Spends Her Budget on X

question 341

Multiple Choice

Suppose that a consumer who spends her budget on X and Y is initially at equilibrium. If the price of X increases, then the MU/P of X will

• A)decrease and the consumer will respond by buying more Y and less X.
• B)decrease and the consumer will respond by buying more X and less Y.
• C)increase and the consumer will respond by buying more Y and less X.
• D)increase and the consumer will respond by buying more X and less Y.

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Definitions:

Average Total Cost

The total cost of production divided by the number of units produced, representing the average cost per unit of goods or services produced.

Allocative Efficiency

A state of resource allocation where it is not possible to make any one individual better off without making at least one individual worse off.

Average Variable Cost

The total variable cost divided by the quantity of output produced; it represents the variable cost per unit of output.

Marginal Cost

Marginal cost is the cost of producing one additional unit of a good or service.