Answer the Question on the Basis of the Following Total

question 88

Multiple Choice

Answer the question on the basis of the following total utility data for products L and M.Assume that the prices of L and M are $3 and $4 respectively and that the consumer's income is $18. $\begin{array}{l}\begin{array}{ccc}\text { Units}&\text{ Total }\\\text { of L } & \text { Utility } \\\hline1 & 9 \\2 & 15 \\3 & 18 \\4 & 20 \\5 & 21\end{array}\begin{array}{ccc}\begin{array}{c}\text { Units } \\\text { of M }\\\hline\end{array} & \begin{array}{c}\text { Total } \\\text { Utility }\\\hline\end{array} \\1 & 16 \\2 & 28 \\3 & 36 \\4 & 40 \\5 & 42\end{array}\end{array}$ Refer to the data.What level of total utility does the rational consumer realize in equilibrium?

• A) 87 utils.
• B) 104 utils.
• C) 51 utils.
• D) 58 utils.

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Definitions:

Growing Perpetuity

A series of cash flows that grow at a consistent rate indefinitely.

Growing Annuity

A series of periodic payments that grow at a constant rate and are received for a finite number of periods.

Perpetuity

A type of annuity that pays a fixed amount of money to an investor at regular intervals indefinitely.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return, reflecting the time value of money.