Tyrell Has $50 Per Week to Spend on Good A

question 132

Multiple Choice

Tyrell has $50 per week to spend on good A, which has a price of $5, and good B, which has a price of $4. He buys six units of A and five of B. The marginal utility of the sixth unit of A is 25, and the marginal utility of the fifth unit of B is 20. Which of the following is true?

• A) He is maximizing his utility.
• B) We cannot tell if he is maximizing his utility unless we know his total utility.
• C) He is not maximizing his utility and should buy more of A.
• D) He is not maximizing his utility and should buy more of B.
• E) He is not maximizing his utility because he is not spending all of his income.

---

Definitions:

Cash Payback Period

The time it takes for an investment to generate an amount of cash inflows equal to the initial cost of the investment.

Net Cash Flows

The difference between cash inflows and cash outflows within a specified period, reflecting the total amount of cash being transferred into and out of a business.

Estimated Cost

A projection or approximation of the cost associated with a particular project, product, or activity.

Cash Payback Period

The time it takes for an investment to generate enough cash flow to recoup the initial outlay.