Figure 21-6
-Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of Mt. Dew is $2, and the value of A is 200. What is the price of popcorn?
A)$0.50
B)$1
C)$2
D)$4

Question

Figure 21-6 
-Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of Mt. Dew is $2, and the value of A is 200. What is the price of popcorn?
A)$0.50 
B)$1 
C)$2 
D)$4

Quizplus · Accepted Answer

To determine the price of popcorn, we need to find the point where the budget line (dotted line) intersects the highest indifference curve (red curve). Since the consumer has a fixed income of $100 and is spending $2 on Mt. Dew, they have $98 left to spend on popcorn (assuming Mt. Dew is the only other good in the market). Using point A on the highest indifference curve, we can see that the consumer is willing to pay $0.50 for popcorn. Therefore, answer A is correct.

Figure 21-6 -Refer to Figure 21-6. Suppose a Consumer Has $100 in Has