A Consumer's Behavior Was Observed in Three Situations with Different

question 31

Multiple Choice

A consumer's behavior was observed in three situations with different prices and incomes.In situation 1, she chose a bundle that cost $1,600.In situation 2, she chose a bundle that cost $2,500.In situation 3, she chose a bundle that cost $3,100.The bundle purchased in situation 2 would cost $1,200 at situation 1 prices.The bundle purchased in situation 3 cost $2,000 at situation 2 prices.This consumer's behavior is known to satisfy the strong axiom of revealed preference.Therefore, the bundle purchased in situation

• A)1 must cost less than $3,100 at situation 3 prices.
• B)3 must cost at least $3,100 at situation 1 prices.
• C)1 can not cost less than $3,100 at situation 3 prices.
• D)2 must cost at least $3,100 at situation 1 prices.
• E)None of the above.

Understand the concept of outsourcing and make-or-buy decisions.

Analyze special orders and determine their financial implications.

Evaluate the use of constrained resources to maximize profitability.

Apply costing methods to real-life business scenarios.

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Definitions:

Marginal Utility

The additional satisfaction or utility that a consumer gains from consuming one more unit of a good or service.

Total Utility

The total satisfaction received from consuming a particular quantity of goods or services.

Price Elasticity

A calculation of the extent to which the desired quantity of a good changes following a price modification.

Beef Sandwiches

A food item consisting of slices of beef placed between slices of bread or within a bun.