Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

7. Suppose that a consumer's utility function is U = x1x2 and the corresponding marginal rate of substitution between x1 and x2, where x1 is

7. Suppose that a consumer's utility function is U = x1x2 and the corresponding marginal rate of substitution between x1 and x2, where x1 is on the horizontal axis and x2 is on the vertical axis, is given by MRS = x2/x1. The budget constraint is given by 2x1 + 4x2 = 80. What is the optimal consumption bundle for this consumer?

A) x1 = 30 and x2 = 5

B) x1 = 20 and x2 = 10

C) x1 = 10 and x2 = 15

D) x1 = 0 and x2 = 20

E) None of the above

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Business

Authors: John Daniels, Lee Radebaugh, Daniel Sullivan

15th edition

133457230, 978-0133457230

More Books

Students also viewed these Economics questions

Question

Verify the formula given for the Pi of the M/M/k.

Answered: 1 week ago

Question

What reward will you give yourself when you achieve this?

Answered: 1 week ago