Tori Devotes All of Her Income to the Consumption of Peanut

question 137

Multiple Choice

Tori devotes all of her income to the consumption of peanut butter and jelly.She has just discovered that at her current level of consumption the marginal utility of a jar of peanut butter is five and the marginal utility of a jar of jelly is seven.Which statement is TRUE?

• A) To maximize her total utility,Tori should consume more of both goods.
• B) To maximize her total utility,Tori should consume less of both goods.
• C) To maximize her total utility,Tori should consume more peanut butter and less jelly.
• D) There is not enough information provided to justify a change in Tori's level of consumption.

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Definitions:

Tax Rate

The rate at which taxes are applied to a person or company's income.

WACC

The Weighted Average Cost of Capital; a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile.

Division A

A segment or branch of a company that operates independently with its own set of management and objectives but is still legally tied to the parent corporation.