During a Study Session for an Economics Exam with Three

question 31

Multiple Choice

During a study session for an economics exam with three other students, Peter Daltry commented on an example of a consumer who had to decide the on number of slices of pizza and cups of Coca-Cola he would consume.Peter explained that 'To maximise his utility, this consumer must equate the marginal utility per dollar for pizza and Coca-Cola.' Was Peter's analysis correct?

• A)Peter described one of the conditions necessary for utility maximisation.The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola.
• B)Peter's statement is correct.
• C)Peter's statement is correct but we must also assume that the consumer is rational.
• D)Peter describes one of the conditions necessary for utility maximisation.The second condition is that total spending on both goods must equal the amount available to be spent.

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Definitions:

Prototype

In cognitive science, a prototype is a mental representation or best example of a category, facilitating faster recognition and categorization of similar stimuli.

Cognitive Dissonance

The mental discomfort experienced by a person who holds two or more contradictory beliefs, ideas, or values.

Displacement

A defense mechanism where negative feelings or impulses are redirected from the original object to a more acceptable or safer target.

Overextension

A linguistic error, common in early language development, where a child applies a word in a broader context than is appropriate.