During a Study Session for an Economics Exam with Three

question 147

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 maximize 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 maximization. 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 maximization. The second condition is that total spending on both goods must equal the amount available to be spent.

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Definitions:

Resting Membrane Potential

The voltage difference across the membrane of a cell at rest, maintained by ion gradients and crucial for the transmission of nerve impulses.

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A fatty substance that surrounds nerves, providing insulation and helping to speed neural transmission.