Joe Bob from Problem 12 Has a Cousin Ike Who

question 11

Multiple Choice

Joe Bob from Problem 12 has a cousin Ike who consumes goods 1 and 2. Ike thinks that 4 units of good 1 is always a perfect substitute for 2 units of good 2. Which of the following utility functions is the only one that would not represent Ike's preferences?

• A) U(x₁, x₂) = 2x₁ + 4x₂ + 1000.
• B) U(x₁, x₂) = 4x²₁ + 16x₁x₂ + 16x²₂.
• C) U(x₁, x₂) = min{ 2x₁, 4x₂}.
• D) U(x₁, x₂) = 20x₁ + 40x₂ - 10,000.
• E) More than one of the above does not represent Ike's preferences.

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Definitions:

Equity

The value of shares issued by a company, representing ownership interest held by shareholders.

Share Capital

The total amount of funds raised by a company through the issuance of shares to its shareholders.

Retained Earnings

The portion of net income that is retained by the corporation rather than distributed to its shareholders as dividends.

Other Reserves

Equity accounts that record gains and losses recognized directly in equity, including revaluation reserves and reserves created from the reallocation of profits.