Figure 10-10

-Refer to Figure 10-10.If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC₂?
A)$8
B)$10
C)$20
D)$40

Question

Figure 10-10
 
-Refer to Figure 10-10.If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC₂?
A)$8 
B)$10 
C)$20 
D)$40

Quizplus · Accepted Answer

The budget constraint BC₂ is tangent to the indifference curve at point E. At point E, the consumer is consuming 12 DVDs and 12 CDs. The price of a DVD is $20, so the price of a CD must be $10.

Figure 10-10 -Refer to Figure 10-10.If the Consumer Has $240 to Spend