For David,the Marginal Utility from an Additional Car Is 2,000

question 295

Multiple Choice

For David,the marginal utility from an additional car is 2,000 units and the marginal utility from an additional vacation is 1,000 units.David is allocating all his budget.Hence to maximize his utility,David will

• A) shift his consumption from the vacation to the car.
• B) shift his consumption from the car to the vacation.
• C) save his budget by not spending it until he can afford both the car and the vacation.
• D) buy both the car and the vacation now.
• E) possibly do something, but there is not enough information available to determine what he would do.

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Definitions:

Contract

A binding legal contract between two or more entities that establishes enforceable duties under the law.

Infant

A legal term referring to a person who is not yet of the legal age of majority, often considered under 18 years old.

Agent

An individual or entity authorized to act on behalf of another (the principal) in legal or business matters.

Law of Incapacity

Legal principles that determine when an individual lacks the legal ability to perform certain actions, such as entering into a contract, due to reasons like age or mental health.