Figure 14-4

question 68

Multiple Choice

Figure 14-4. The figure shows a utility function for Dexter.
-Refer to Figure 14-4. From the appearance of the graph, we know that

• A)Dexter's level of satisfaction increases by more when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001.
• B)Dexter's level of satisfaction increases by less when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001.
• C)Dexter's level of satisfaction increases by the same amount when his wealth increases from $1,001 to $1,002 as it does when his wealth increases from $1,000 to $1,001.
• D)None of the above answers can be inferred from the appearance of the utility function.

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Definitions:

Accounting Profits

The total revenue of a business minus the explicit costs, reported on financial statements according to standard accounting practices.

Economic Profits

The disparity between total income and combined expenses, encompassing both out-of-pocket and hidden costs.

Economic Profits

The margin between an organization's complete earnings and its aggregate expenditures, covering both visible and hidden costs.

Implicit Costs

Implicit costs are the opportunity costs of using resources owned by the business for production instead of lending, selling, or renting them out.