Assume That a Consumer Has a Given Budget or Income

question 263

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. For this consumer, the opportunity cost of buying one more apple is

• A) 0.5 of a banana.
• B) 0.8 of a banana.
• C) 1 banana.
• D) 2 bananas.

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Definitions:

Favorable

A term describing results or conditions that are positive, beneficial, or advantageous.

Variable Overhead Spending Variance

The difference between the actual and budgeted or standard costs of variable overheads incurred during a period.