Jason Is Faced with Two Options: a BMW Costing $40,000

question 38

Multiple Choice

Jason is faced with two options: A BMW costing $40,000 gives him an additional 800 units of utility, and a laser printer costing $1,000 gives him an additional 25 units of utility. Rational choice theory would predict that he would choose:

• A) to purchase the BMW.
• B) to purchase the laser printer.
• C) it is impossible to choose because the goods have different prices.
• D) it is impossible to choose because BMWs and laser printers are fundamentally different goods with different purposes.

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Definitions:

Long-Term Debt

Represents loans and financial obligations lasting over one year that a company owes and is recorded on its balance sheet.

Synergy Value

The potential additional value generated from combining two companies, often expected from cost savings or by achieving higher revenues.

Equity-Financed

Describes a business funding model where capital is raised through the sale of equity or shares in the company rather than through borrowing.

Cash or Stock

An option given to shareholders or partners, typically during a merger or acquisition, to receive payment in cash, stock, or a combination of both.