A Utility Function Is

question 30

Multiple Choice

A utility function is:

• A) an equation for calculating the most utility a particular person can derive.
• B) an equation for calculating the total utility that a particular person derives from consuming a particular good over a particular time period.
• C) an equation for calculating the total utility that a group of people derive from consuming a particular good.
• D) an equation for calculating the total utility that a particular person derives from consuming a particular combination of goods and services.

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Definitions:

Interest Tax Shield

The interest tax shield refers to the reduction in income taxes resulting from deducting interest payments on debt from taxable income.

Corporate Tax Rate

The corporate tax rate is the percentage of a corporation's taxable income that it must pay to the government as taxes.

Debt

A sum of money lent by one party to another, which has to be repaid at a future date, typically with added interest.

Debt Ratio

A ratio that evaluates how much a business relies on debt financing, calculated through the division of the company's total liabilities by its total assets.