The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 9 percent to help finance a new playground facility in Los Angeles. This year the cost of debt is 25 percent higher; that is, firms that paid 11 percent for debt last year will be paying 13.75 percent this year. b. If the receipts of the foundation were found to be taxable by the IRS (at a rate of 25 percent because of involvement in political activities), what would the after-tax cost of debt be?

Utility increases at a decreasing rate.

Explanation:

Utility is the total satisfaction derived from consumptjon.

The utility function measures the total satisfaction derived from consumptjon.

Utility increases at a decreasing rate.

This can be illustrated with an example.

Imagine I am coming from a desert with no access to drinking water. I am very thirsty. The satisfaction I would derive from the first cup of water would be the highest. After my first cup, the utility I would derive from other cups would be diminishing.