In Problem 3, Professor Nightsoil's Utility Function Is U_N(B_N, P_N)

question 12

Multiple Choice

In Problem 3, Professor Nightsoil's utility function is U_N(B_N, P_N) and Dean Interface's utility function is U_I(B_I, P_I) . If Nightsoil's initial endowment is 5 bromides and 10 platitudes and if Interface's initial endowment is 2 bromides and 10 platitudes, then at any Pareto efficient allocation where both persons consume positive amounts of both goods,

• A) Interface consumes 4 platitudes.
• B) Nightsoil consumes the same ratio of bromides to platitudes as Interface.
• C) Interface consumes 3.50 bromides.
• D) Interface consumes 2 bromides.
• E) Interface consumes 2 platitudes.

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Definitions:

Financial Lease

A type of lease agreement wherein the lessee is responsible for all the costs associated with the asset's ownership and gets to record the asset on their balance sheet.

Depreciation Tax Shield

A reduction in taxable income that results from the allowance for depreciation expenses, providing a beneficial impact on cash flow.

Lease-Purchase Analysis

The process of assessing the financial and operational aspects of deciding whether to lease or purchase equipment or property.

Capital Lease

A long-term lease agreement that allows the lessee to effectively own an asset without having it on their balance sheet.