(Figure: Utility Table Alpha) in the Table, Assume That a Consumer

question 71

Multiple Choice

(Figure: Utility Table Alpha) In the table, assume that a consumer has a budget of $14, apple juice costs $2 per bottle, and scones cost $4 each. Utility will be maximized by buying:
$\quad\quad\quad\quad\text { Apple Juice }$ $\quad\quad\quad\quad\quad\quad\quad\text { Scones }$
$\begin{array}{|c|c|c|c|}\hline \text { Quantity } & \text { Total Utility } & \text { Quantity } & \text { Total Utility } \\\hline 0 & 0 & 0 & 0 \\\hline 1 & 25 & 1 & 31 \\\hline 2 & 43 & 2 & 60 \\\hline 3 & 56 & 3 & 83 \\\hline 4 & 66 & 4 & 105 \\\hline 5 & 74 & 5 & 116 \\\hline\end{array}$

• A) 5 bottles of apple juice and 1 scone.
• B) 3 bottles of apple juice and 2 scones.
• C) 1 bottle of apple juice and 3 scones.
• D) no bottles of apple juice and 4 scones.

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Definitions:

Straight-Line Depreciation

A technique for segmenting the cost of a material asset over its life in even annual segments.

After-Tax Discount Rate

The discount rate used in financial calculations that reflects the net cost of capital after accounting for the effects of taxes.

Discount Factor

A factor by which a future cash flow is multiplied to obtain its present value.

After-Tax Discount Rate

The interest rate used in discounted cash flow analysis to calculate the present value of future cash flows after accounting for taxes.