Brendan's utility function is 1 2 1 2 u(x,x) = xx. The prices of 1x and...
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Brendan's utility function is 1 2 1 2 u(x,x) = xx. The prices of 1x and 2 x are $2 and $2 respectively. Brendan has an income of $20. (1) How many of each good will he consume to maximize his total utility? (ii) What the maximum utility level does he receive? (Hint: For the utility function 1212 u(x,x) = xx, you have the 12 MU= x and 21 MU= x). (iii) Suppose that Brendan's income increases to $32 but a tax is placed on 1 x so that 1 x costs Brendan $4 each while the price of 2 x stay the same, how many 1 x and 2 x will he consume now? What the maximum utility level will he receive in this case? Brendan's utility function is 1 2 1 2 u(x,x) = xx. The prices of 1x and 2 x are $2 and $2 respectively. Brendan has an income of $20. (1) How many of each good will he consume to maximize his total utility? (ii) What the maximum utility level does he receive? (Hint: For the utility function 1212 u(x,x) = xx, you have the 12 MU= x and 21 MU= x). (iii) Suppose that Brendan's income increases to $32 but a tax is placed on 1 x so that 1 x costs Brendan $4 each while the price of 2 x stay the same, how many 1 x and 2 x will he consume now? What the maximum utility level will he receive in this case?
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12 12 u x x xx 12 1 12 2 36 the maximum utility that Brendan can achieve ii We know that the margina... View the full answer
Related Book For
Concepts in Federal Taxation
ISBN: 9780324379556
19th Edition
Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher
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