Figure 3-2 Shows the Preferences of a Consumer for Two

question 78

Multiple Choice

Figure 3-2 shows the preferences of a consumer for two goods,guns and butter.
-Refer to Figure 3-2.Which of the following is true?

• A)Point E is an unattainable market basket for the consumer.
• B)Point E is the point at which the consumer will maximize his satisfaction.
• C)The consumer is indifferent between points F and G.
• D)The consumer would rather consume at point E than at either F or G.

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Definitions:

Expected Utility

The sum of the utilities coming from all possible outcomes of a deal, weighted by the probability of each occurring.

Risk-loving

An inclination to engage in behaviors or decisions that involve exposure to uncertainty, with the potential for higher rewards.

Expected Value

The sum of the payoffs associated with each possible outcome of a situation weighted by its probability of occurring.

Fixed Salary

A pre-determined amount of pay that an employee receives on a regular basis, such as monthly or annually, regardless of performance or hours worked.