Answer the Question on the Basis of the Following Two

question 280

Multiple Choice

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing

• A)3 units of J and 7 units of K.
• B)5 units of J and 5 units of K.
• C)4 units of J and 5 units of K.
• D)6 units of J and 3 units of K.

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Definitions:

LEAPS

Long-Term Equity Anticipation Securities, which are options contracts with expiration dates longer than one year, offering longer-term investment strategies.

Initial Maturities

The original duration until the expiration or due date of a financial instrument, such as a bond or loan, when first issued.

Exchange-Traded Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a specific amount of a security at a set price on or before a certain date.

Call Contract

An options contract that gives the holder the right to buy an underlying asset at a specified price within a certain time frame.