Alessandro Needs to Raise Money Quickly in Order to Save

question 12

Multiple Choice

Alessandro needs to raise money quickly in order to save his business from bankruptcy. A friend of his tells him of an investment which promises big returns and cannot go wrong. In a moment of weakness he decides to get his aunt, an illiterate elderly widow, who only speaks Italian, to sign a deed transferring the property of her house to him by telling her that she is merely witnessing his signature in relation to a business deal. In order to secure the money needed for the investment, Allessandro mortgages the house to a bank. The investment turns out to be a failure and Allessandro is unable to pay off the mortgage. The bank seeks to repossess the house from his aunt. Can the aunt prevent the bank from evicting her?

• A) No, a signature is at all times binding. The bank may take possession of the house.
• B) No, the bank has acquired rights innocently and for value.
• C) Yes, the aunt was mistaken as to the nature of the document she signed.
• D) Yes, the contract is voidable for misrepresentation.

Calculate the optimum combination of goods to maximize utility with a given budget.

Apply the concept of the marginal utility to price ratio (MU/P) in determining the utility-maximizing combination of goods.

Analyze the effects of price changes on the quantity demanded through the income and substitution effects.

Understand how the demand curve is derived from diminishing marginal utility.

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Definitions:

Depreciation Expenses

The systematic allocation of the cost of a tangible asset over its useful life.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Accounts Payable

Liabilities of a firm that are due to be paid to creditors within a short period of time, usually within a year.

Net Income

The total revenue minus total expenses, indicating the profit made by a business over a period.