The Demand Curve for Macadamia Nuts Is Downward Sloping

question 230

Multiple Choice

The demand curve for macadamia nuts is downward sloping.This slope is because consumers maximize their utility and an increase in the price of macadamia nuts leads to

• A) no change in quantity demanded.
• B) an increase in the marginal utility per dollar from macadamia nuts.
• C) a decrease in the marginal utility per dollar from macadamia nuts.
• D) consumers' budget lines rotating outward with their slopes changing.
• E) consumers' budget lines shifting outward with no change in their slope.

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows, used in capital budgeting to assess the profitability of an investment.

Profitability Index

A capital budgeting tool used to measure the relative profitability of an investment, calculated by dividing the present value of future cash flows by the initial investment cost.

Accounting Rate

The accounting rate, or rate of return, measures the profitability of investments or projects, expressed as a percentage.

Discounted Cash Flows

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for time value of money.