Individuals Derive Utility from Picnics, P, and Kayak Trips, K

question 51

Multiple Choice

Individuals derive utility from picnics, p, and kayak trips, k. Assuming that an individual's utility is U(p,k) = k^0.5p^0.5 and income is $100, what is the marginal rate of substitution (MRS) between picnics and kayak trips?

• A)MRS = 1.
• B)MRS = -1.
• C)MRS = -
• D)There is no substitution because picnics and kayak trips are perfect complements.

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Definitions:

Stock Market Values

The overall value of shares traded within a stock market, representing the market's perception of the total worth of its listed companies.

Uncertainty

The degree to which the outcome of an event, choice, or investment is unknown.

Constant Growth DDM

The Dividend Discount Model assumes dividends grow at a constant rate indefinitely, used to estimate the value of a company's stock.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends.