In the Economy of Mungo, There Is a Third Person

question 10

Multiple Choice

In the economy of Mungo, there is a third person called Ike.Ike has a red income of 104 and a blue income of 30.Recall that blue prices are 1 bcu (blue currency unit) per unit of ambrosia and 1 bcu per unit of bubble gum.Red prices are 2 rcus (red currency units) per unit of ambrosia and 6 rcus per unit of bubble gum.You have to pay twice for what you buy, once in red currency, once in blue currency.If Ike spends all of his blue income but not all of his red income, he must consume

• A)at least 19 units of ambrosia.
• B)at least 11 units of bubble gum.
• C)exactly twice as much bubble gum as ambrosia.
• D)at least 21 units of bubble gum.
• E)equal amounts of ambrosia and bubble gum.

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Definitions:

Factoring

A financial transaction in which a business sells its accounts receivable to a third party at a discount to gain immediate cash.

Uncollectible Accounts

Accounts receivable that a business has been unable to collect and deems as unlikely to be paid.

Aging of Receivables Method

An accounting technique used to estimate the amount of receivables that may not be collectible, based on the length of time they have been outstanding.

Percent of Sales Method

A financial forecasting model that estimates certain balance sheet and income statement accounts as a percentage of projected sales.