Assume That a Consumer Has a Given Budget or Income

question 297

Multiple Choice

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. This means that, in order to buy two bananas, this consumer must forgo

• A) 1 apple.
• B) 1.5 apples.
• C) 0.5 apple.
• D) 0.75 apple.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product, indicating how much contributes to covering fixed costs and generating profit.

Break Even

The point at which total costs equal total revenue, meaning that a business or project is neither making a profit nor incurring a loss.

Variable Cost

A cost that varies with the level of output or production, such as materials and labor costs.

Variable Cost

Costs that change directly and proportionally with the level of production output or sales volume.