Suppose You Are Consuming a Particular Good and You Could

question 173

Multiple Choice

Suppose you are consuming a particular good and you could somehow give back the last unit you consumed. What would happen to total and marginal utility (assuming that the marginal utility of the unit given back is positive) ?

• A)Both total and marginal utility would decrease.
• B)Both total and marginal utility would increase.
• C)Total utility would increase but marginal utility would decrease.
• D)Total utility would decrease but marginal utility would increase.
• E)There would be no change in marginal utility but total utility would decrease.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset, dividing its cost minus salvage value by its useful life, resulting in equal annual depreciation expenses.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment or project, calculating the difference between the present value of cash inflows and outflows.

Present Value Index

A calculation that compares the present value of cash inflows to the initial investment, often used in capital budgeting.

Compound Interest

The calculation of interest on the initial principal and also on the accumulated interest of previous periods.