MsQuasimodo Has the Utility Function U(x, M)= 100x - X²/2

question 28

Multiple Choice

Ms.Quasimodo has the utility function U(x, m) = 100x - x²/2 + m, where x is her consumption of earplugs and m is money left over to spend on other stuff.If she has $10,000 to spend on earplugs and other stuff and if the price of earplugs rises from $50 to $75, then her net consumer's surplus

• A)falls by 937.50.
• B)falls by 625.
• C)falls by 2,937.50.
• D)increases by 468.75.
• E)increases by 1,875.

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Definitions:

Straight-Line Method

A depreciation method that allocates an equal amount of depreciation expense for an asset over its useful life.

Discount Rate

The interest rate used to discount future cash flows to present value, often in investment and finance calculations.

Net Present Value

A calculation that compares the present value of cash inflows to the present value of cash outflows over a period of time to evaluate an investment.

Depreciable Equipment

Tangible assets used in business operations whose cost is allocated over its useful life due to wear and tear, obsolescence, or decay.