Question: 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

Brendan's utility function is 1 2 1 2 u(x,x) = xx. The

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?

Step by Step Solution

★★★★★

3.45 Rating (168 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

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 full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Brendan and Theresa are married and have three children in college. Their twin daughters, Christine and Katlyn, are freshmen and attend the same university. Their son, Kevin, is a graduate student....

Utility pole BC is guyed by cable AB as shown. Knowing that the moments about the x and z axes of the force exerted by the cable at B are 900 lbft and 315 lbft, respectively, determine the length of...

Is P2 spanned by 1 + x + 2x2, 2 + x + 2x2, - 1 + x + 2x2?

Excerpts from the Year 2 annual report of Air Products and Chemicals, Inc., follow. The income statement and balance sheet are condensed but the note entitled Summarized Financial Information of...

Rufus and Rhonda are a married couple with 3 dependent children, all under 16 years of age. Rufus, 46, is an executive with Plowshare Corporation. Rhonda, 39, is a self-employed attorney. Rufus...

Lifetime Escapes generates average revenue of $ 7,500 per person on its 5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows: Airfare ................$ 1,600...

1. Without knowing more about the Haggertys, would you say they might benefit from financial planning? Cite specific examples. 2. What do you think of Jans idea of investing in growth stocks? What...

A study was conducted to evaluate the effectiveness of an antihypertensive product. Three groups of 20 rats each were randomly selected from a strain of hypertensive rats. The 20 rats in the first...

To permit measurement of her speed, a skydiver carries a buzzer emitting a steady tone at 1 800 Hz. A friend on the ground at the landing site directly below listens to the amplified sound he...

Compute the true utility function and the best linear approximation in x and y (as in Equation (21.9)) for the following environments: a. A 10 x 10 world with a single +1 terminal state at (10, 10)....

Sheridan Company showed the following balances at the end of its first year: Cash Prepaid insurance Accounts receivable Accounts payable Notes payable Owner's Capital Owner's Drawings Revenues...

Each of the following people below has invested the following amounts today and will keep the money invested for the next ten years. Investment amount today Interest rate Compounding A ...

A company can change to a new accounting principle if management can justify that the change will result in higher net income. lower net income for tax purposes. more relevant information for...

P14-26. Forecasting with Parsimonious Method and Estimating Share Value Using the ROPI Model Following are income statements and balance sheets for Cisco Systems. CISCO SYSTEMS Consolidated...

On July 1 , 2 0 2 2 , Burrough Company acquired 1 2 0 , 0 0 0 of the outstanding shares of Carter Company for $ 1 5 per share. This acquisition gave Burrough a 2 0 percent ownership of Carter and...

You are about to begin a summer internship in Logistics working for a company Express Mover that provides packaging and shipping services to customers moving large amounts of materials from 2,000...

help! Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2020. As of that date, Abernethy has the following trial balance: Accounts payable $ 50,800 Accounts receivable $...

Clyde Gamolo opened Cagayan Chiropractic Clinic. The following transactions occurred during June of this year: Gamolo invested P180,000 cash in the professional practice. b. Gamolo invested in the...

Is safety a company function or a company Value? Make the case

below are my questions..its compl,ete question11 1. Ann is ambiguity-averse and has constant absolute risk aversion a. There is a stock that pays y per unit where y ~ N (u, s') where u e [u, p] is...

Help with the following questions This Problem set tests the knowledge that you accumulated in the first 4 lectures. It is mostly on the mathematical techniques that we developed, but there is also...

A.nswer in completeness. 2. (5 points) The representative firm has a production function Y = 30N. Part of government spending is a perfect substitute for private consumption. Examples are Head Start...

tutors all questions are attached below 1. Imagine an individual who has the following Cobb-Douglas Utility function: U = $1 0.25 0.75 This person has an income of $70,000. Suppose the price of Good...

Hello, please help with the following questions (25-29). The first image is there for reference a Andreoni-Miller preferences and a Dictator Game Consider a dictator game in which the price of giving...

Please help answer the question in the screenshot. Thanks! This problem exercises the basic concepts of game playing, using tic-tac-toe (noughts and crosses) as an example. We define Xn as the number...