Ms Quasimodo in Problem 3 Has the Utility Function U(x

question 4

Multiple Choice

Ms. Quasimodo in Problem 3 has the utility function U(x, m) , where x is her consumption of earplugs and m is money left over to spend on other stuff. If she has $10,000 to spend on earplugs and other stuff and if the price of earplugs rises from $50 to $65, then her net consumer's surplus

• A) falls by 2,637.50.
• B) falls by 525.
• C) falls by 637.50.
• D) increases by 318.75.
• E) increases by 1,275.

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Definitions:

Closely Held

A business owned by a limited number of shareholders with no public market for its shares.

No-Par Stock

Shares issued without a par value, which means their face value is not fixed in the stock certificate, enabling more flexibility in setting the share prices.

Stated Value

The nominal value assigned to no-par value stock by the company's board of directors, used for accounting purposes.

Legal Capital

The minimum amount of capital that a company is required to maintain as per law, to protect creditors and ensure that the company remains solvent.