Morris Has the Utility Function U(b, W) = 3b

question 5

Multiple Choice

Morris has the utility function U(b, w) = 3b + 3w and Philip has the utility function U(b, w) = bw, where b is the number of books consumed per month and w is bottles of wine consumed per month. If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box, then the contract curve contains

• A) a straight line running from the upper right corner of the box to the lower left.
• B) a curve that gets steeper as you move from left to right.
• C) a straight line with slopepassing through the lower left corner of the box.
• D) a straight line with slopepassing through the upper right corner of the box.
• E) a curve that gets flatter as you move from left to right.

Explain the role of the Income Summary account in the closing process.

Understand the impact of closing entries on the owner's capital account.

Calculate the ending owner's equity based on net income/loss and owner's drawings.

Describe the preparation and purpose of a post-closing trial balance.

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Definitions:

Behaviour

The behavior or responses of a person or group when influenced by external or internal factors.

Negative Reinforcer

A negative reinforcer is an unpleasant stimulus whose removal leads to an increase in the probability that a preceding response will be repeated in the future.

Sensitive Person

An individual who experiences emotions deeply and may be more affected by external events compared to the average person.

Criticism

The act of expressing disapproval or finding faults in something or someone, often including suggestions for improvement.