-The Above Table Shows Homer's Total Utility from Boxes of Doughnuts

question 5

Multiple Choice

-The above table shows Homer's total utility from boxes of doughnuts. As Homer's consumption of doughnuts increases,

• A) his total utility increases, but his marginal utility decreases.
• B) both his total utility and his marginal utility decrease.
• C) both his total utility and his marginal utility increase.
• D) his total utility decreases, but his marginal utility increases.
• E) None of the above answers is correct.

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Definitions:

Real Option

The opportunity to undertake certain business initiatives, such as deferring, abandoning, expanding, or contracting a project, based on future events.

Underlying Asset

A financial asset or instrument upon which a derivative’s price is based, including stocks, bonds, commodities, or currencies.

Call Option

A financial contract that gives the holder the right, but not the obligation, to buy a stock or other asset at a specified price within a certain period.

Put Option

A financial contract giving the option buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified timeframe.