Kathleen likes avocado and crab dip. After eating avocado and crab dip with four crackers, she switches to cheese with crackers. We can conclude that
A. at this point cheese and crackers have a higher marginal utility per dollar spent than that of avocado and crab dip with crackers.
B. the avocado and crab dip cannot have tasted that good.
C. the avocado and crab dip with crackers now has a marginal utility of zero.
D. Kathleen is no longer maximizing her utility.
Answer: A
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Which one of the following items would be the most liquid?
a. Pizza. b. Ticket to next week's basketball game. c. Stereo. d. Dollar bill. e. U.S. savings bond.
Jan's Dry Cleaning holds $10,000 on a typical day, although only $2,000 is essential for carrying out business. Making a midday deposit is estimated to reduce cash holdings to $8,000 and cost an extra $80 per year in lost production. If, in addition, an armored car service is engaged to pick up cash more frequently for a fee of $120 per year, cash holdings will be further reduced to $6,000 per day. Employing a computerized cash management service for an annual fee of $180 would reduce cash holdings further to $4,000. If any reduction in cash holdings will be invested in government bonds earning 7%, then how much money should Jan's hold?
A. $4,000 B. $8,000 C. $10,000 D. $6,000