Mutt's Utility Function Is U(m, J) = Max{ 3m, J}

question 43

Multiple Choice

Mutt's utility function is U(m, j) = max{ 3m, j} and Jeff's utility function is U(m, j) = 3m + j. Mutt is initially endowed with 6 units of milk and 2 units of juice and Jeff is initially endowed with 2 units of milk and 6 units of juice. If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box, then the set of Pareto optimal allocations includes the

• A) bottom edge of the Edgeworth box but no other edges.
• B) left edge of the Edgeworth box but no other edges.
• C) right edge of the Edgeworth box but no other edges.
• D) left edge and bottom edge of the Edgeworth box.
• E) right edge and top edge of the Edgeworth box.

Apply the concept of WACC in investment decision-making processes.

Interpret the effect of taxes on the cost of capital.

Calculate the growth rate of dividends and understand its impact on the cost of equity.

Understand the principles of reinforcement in operant conditioning.

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