Cal Exchanges Office Furniture (Fair Market Value = $100,000;adjusted Basis

question 45

Multiple Choice

Cal exchanges office furniture (fair market value = $100,000;adjusted basis = $90,000) and a business auto (fair market value = $10,000;adjusted basis = $6,000) for fire retardant filing cabinets (fair market value = $110,000;adjusted basis = $80,000) .How much gain or loss does Cal recognize on the exchange?

• A)0
• B)$4,000 gain on auto
• C)$10,000 gain on furniture
• D)$14,000 total gain
• E)None of the above

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Definitions:

Diminishing Marginal Utility

The principle that as a consumer consumes more of a good or service, the additional satisfaction gained from consuming an additional unit decreases.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to what is observed with normal goods.

Diminishing Marginal Utility

The principle that as a person consumes more of a good, the satisfaction (utility) gained from consuming an additional unit decreases.

Total Satisfaction

The total amount of pleasure or utility that a consumer receives from consuming a certain quantity of goods or services.