Suppose that Ken cares only about bathing suits (B) and flip-flops (F). His utility function is...

Suppose that Ken cares only about bathing suits (B) and flip-flops (F). His utility function is U = B 0.75F 0.25. The price of bathing suits are $12, and the price of flip-flops are $6. Ken has a budget of $240. (a) Draw and label a graph containing Ken’s budget line with bathing suits (B) on the x-axis and flip-flops (F) on the y-axis. Graph the x and y intercepts and determine the slope of the budget line. (b) Define and show mathematically the two conditions that need to be met for a consumption allocation {B ∗ , F ∗} to maximize utility. (c) What is the marginal utility of good B (MUB) and of good F (MUF) for Ken. (d) What is the optimal choice of B and F for Ken to maximize his utility? Label this point A on your graph from part (a). (e) What is the utility generated by Ken from his optimal consumption of B and F from part (d)? Find another bundle that also achieves this utility, label this new bundle point B on your graph from part (a) and draw an indifference curve between points A and B

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Rahul Sunny answered 1 year ago

4. Suppose that Jana cares only about apples and lettuce. Her utility function is U =...

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Krishna only spends his money on clothes, c, and food, f. His utility function is quasilinear:...

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Suppose that Tim gets utility from only two goods, rice (R) and beans (B) and his...

Suppose that Tim gets utility from only two goods, rice (R) and beans (B) and his preferences are represented by the utility function U(R,B) = R^2 * B^5. If Tim's income is 42 and price of rice is 1, price of beans is 3. How many units of rice and beans will he choose? Tim’s income elasticity of demand for beans? Explain clearly plz.

Suppose the Bank of Canada cares only about keeping the economy close to full-employment output. The...

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TRUE/FALSE/UNCERTAIN Suppose a consumer likes Coke just as much as Pepsi and only cares about getting...

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Q9. Suppose that John spends $320 on good X and good Y; his utility function is...

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Roli loves to read and has a large dog. She consumes only two goods—books (B) and bags of dog food (F). Her utility function is given by:

Roli loves to read and has a large dog. She consumes only two goods—books (B) and bags of dog food (F). Her utility function is given by:U = U(B, F) = 4B0.5F0.5If Roli’s income is equal to $750/week and the price of a book (Pb) is equal to $25 and the price of a bag of dog food (Pf ) is equal to $50, how many books and bags of dog food should Roli purchase to maximize her utility? Note:...

Investor B maximizes his utility function by investing 40% of his wealth in the risk-free asset. What fraction of his wealth does investor B invest in X?

Consider an economy consisting of two stocks (X and Y) and a risk-free asset. Investor A maximizes his utility function by investing 10% of his wealth in the risk-free asset, 75% in X, and 15% in Y. Investor B maximizes his utility function by investing 40% of his wealth in the risk-free asset. What fraction of his wealth does investor B invest in X?

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