A Utility Function Is an Equation for Calculating

question 85

Multiple Choice

A utility function is an equation for calculating:

• A)the maximum utility an individual can derive.
• B)the total utility an individual derives from consuming a particular good over a particular time period.
• C)the total utility a group of people derive from consuming a particular good.
• D)the total utility that an individual derives from consuming a particular combination of goods and services.

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Definitions:

Tax Rate

The part of an individual's or corporation's earnings that is subject to taxation.

Debt-Equity Ratio

The ratio indicating a corporation's reliance on debt financing, found by dividing its total debts by the equity held by its shareholders.

After-Tax Cost of Debt

The net cost of debt after accounting for the effects of taxes, reflecting the actual cost to a company.

Cost of Equity

The theoretical compensation paid by a company to its equity investors, or shareholders, for the risk involved in investing their capital.