Table 10-4 -Refer to Table 10-4,which Lists the Values of Harry Taber's

question 38

Multiple Choice

Table 10-4

-Refer to Table 10-4,which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos.Assume that the price of the sub sandwiches is $4 and the price of tacos is $2.When Harry's income is $14 he buys two Italian sub sandwiches and three tacos.The last column lists the values of the marginal utility per dollar for tacos when the price of tacos decreases to $1.Complete this statement: As a result of the change in price

• A)Harry's purchasing power has increased.He will reduce his consumption of tacos so he can buy one more sub.This is an example of the substitution effect of a price change.
• B)Harry's purchasing power has increased.If tacos are a normal good for Harry he will buy fewer tacos.This is an example of the income effect of a price change.
• C)Harry's purchasing power has increased.If tacos are a normal good for Harry he will buy more tacos.This is an example of the income effect of a price change.
• D)Harry's purchasing power has increased.Harry buys fewer tacos.This is an example of the substitution effect of a price change

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Definitions:

Underapplied

A situation where the assigned manufacturing overhead expenses fall short of the real overhead costs that have been spent.

Standard Labor-Hours

The predetermined amount of labor-hours expected to be required to produce a unit of product or perform a task.

Actual Output

The real production volume or amount of work done, as opposed to planned or theoretical outputs.

Manufacturing Overhead

Costs that are incurred in the manufacturing process other than direct materials and direct labor, such as utilities, depreciation, and maintenance of equipment.