Table 7-3 -Refer to Table 7-3

question 369

Multiple Choice

Table 7-3
$\begin{array}{|c|c|c|}\hline & \text { Ice Cream Cones } & \text { Lime Fizz Soda } \\\hline \text { Quantity } & M U & M U \\\hline 1 & 30 & 40 \\\hline 2 & 25 & 35 \\\hline 3 & 20 & 26 \\\hline 4 & 15 & 18 \\\hline 5 & 10 & 15 \\\hline 6 & 5 & 7 \\\hline\end{array}$
-Refer to Table 7-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda.The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1.Use this information to select the correct statement.

• A) We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his budget is.
• B) To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda.
• C) We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity.
• D) If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda.

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Definitions:

Cost of Equity

The return that investors expect for investing in a company's equity, indicating the compensation the market demands for taking on the risk of owning the stock.

Weighted Average Cost of Capital

The average rate of return a company is expected to pay its security holders, weighted by the proportion of each finance source in the company's structure.

Bonds

Fixed-income investment products representing a loan made by an investor to a borrower, typically corporate or governmental.

Preferred Shares

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