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A college student has two options for meals: eating at the dining hall for $6 per meal, or eating a Cup O’ Soup for$1.50 per meal. Her weekly food budget is $60. a. Draw the budget constraint showing the trade-off between dining hall meals and Cups O’ Soup. Assuming that she spends equal amounts on both goods, draw an indifference curve showing the optimum choice. Label the optimum as point A. b. Suppose the price of a Cup O’ Soup now rises to$2. Using your diagram from part (a), show the con sequences of this change in price. Assume that our student now spends only 30 percent of her income on dining hall meals. Label the new optimum as point B. c. What happened to the quantity of Cups O’ Soup consumed as a result of this price change? What does this result say about the income and substitution effects? Explain. d. Use points A and B to draw a demand curve for Cup O’ Soup. What is this type of good called?
Cruz Company uses LIFO for inventory costing and reports the following financial data. It also recomputed inventory and cost of goods sold using FIFO for comparison purposes.
|LIFO cost of goods sold||740||680|
|FIFO cost of goods sold||660||645|
|Current assets (using LIFO)||220||180|
Compute its inventory turnover and days' sales in inventory for 2010 using (a) LIFO numbers and (b) FIFO numbers. (Round answers to the tenth place.)
Comment on and interpret the results of part 1.