Ike's Utility Function Is U(x, Y) = 25xy

question 41

Multiple Choice

Ike's utility function is U(x, y) = 25xy. He has 12 units of good x and 8 units of good y. Ben's utility function for the same two goods is U(x, y) = 4x + 4y. Ben has 9 units of x and 13 units of y.

• A) Ike prefers Ben's bundle to his own bundle, but Ben prefers his own bundle to Ike's.
• B) Ben prefers Ike's bundle to his own, but Ike prefers his own bundle to Ben's.
• C) Each prefers the other's bundle to his own.
• D) Neither prefers the other's bundle to his own.
• E) Since they have different preferences, there is not enough information to determine who envies whom.

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Definitions:

Factoring Transaction

A financial transaction where a business sells its accounts receivable to a third party (the factor) at a discount.

Total Assets

The sum of all assets owned by an entity, as recorded on the balance sheet, representing the resources controlled by the entity.

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate income and expenditures to the appropriate period, ensuring compliance with the accrual basis of accounting.

Allowances for Doubtful Accounts

A contra-asset account that reduces the total amount of accounts receivable to reflect the portion that is estimated not to be collected.