Basil Is Maximizing His Utility from Consuming Tea and Crumpets

question 6

Multiple Choice

Basil is maximizing his utility from consuming tea and crumpets.If the marginal utility of his last cup of tea was 24 units of utility and that of his last crumpet was 6 units of utility, which of the following is true?

• A)The price of tea is six times the price of crumpets.
• B)The price of crumpets is four times the price of tea.
• C)The prices of tea and crumpets are equal.
• D)The price of tea is four times the price of crumpets.
• E)The MU of the next cup of tea is less than the MU of the next crumpet.

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Definitions:

Equipment Replacement

Equipment Replacement involves the process of substituting old, inefficient, or broken equipment with newer, more efficient models to maintain operational efficiency.

Incremental Cash Flows

The additional cash flow received by an organization from undertaking a new project, considered essential for analysis in capital budgeting.

Firm's Future Cash Flows

Expected cash receipts and payments a company anticipates over future periods of time.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.