Question
Questions 7 and 8 refer to a consumer whose utility function is U=U(x,y)=xy+x+2y+2 where x and y are the quantities she consumes of the only
Questions 7 and 8 refer to a consumer whose utility function is U=U(x,y)=xy+x+2y+2 where x and y are the quantities she consumes of the only two products X (food) and Y (entertainment) available to her. This consumer is always maximizing her utility subject to her budget constraint. Question 7 If the best affordable bundle for the consumer is (x^*,y^* )=(6,3), that is, six (6) units of food and three (3) units of entertainment, then the relative price of food in terms of entertainment is exactly A. $0.50 B. 0.50 C. $2.00 D. 2.00 E. Not enough information is supplied to provide an answer Question 8 If the price of each unit of food is $2.00 and a unit of entertainment costs $4.00, the highest indifference curve this consumer can attain with an income of $24.00 is A. U^*=2 B. U^*=20 C. U^*=30 D. U^*=32 E. Not enough information is supplied to provide an answer
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