Mike's Income Is $450 Per Month

question 59

Multiple Choice

Mike's income is $450 per month.He spends all of it on books (B) and CDs (C) .Books cost $10 and CD's cost $15.His preferences correspond to the utility function U(B,C) = BxC.For that utility function,the marginal benefit of books is C and the marginal benefit of CDs is B. How many books and how many CDs will he purchase in a month?

• A) 10 CDs and 30 Books
• B) 30 CDs and 10 Books
• C) 20 CDs and 15 Books
• D) 15 CDs and 30 Books

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Definitions:

Recognized Gains

Profits from the sale of an asset that are realized and subject to capital gains tax.

Tax Bracket

A range of income subject to a particular income tax rate. Tax systems often have several brackets, with individuals paying a higher rate as their income increases.

Investment Income

This refers to the money that someone earns from their investments, like dividends, interest, or rental income.

Gifted Stock

Equity in a company given to someone at no cost, often as part of an estate planning strategy to transfer wealth or as an incentive or reward.