Mr Inflexible's Utility Function Is U(x₁,x₂)= Min(x₁,x₂)

question 45

Multiple Choice

Mr. Inflexible's utility function is U(x₁,x₂) = min(x₁,x₂) . The price of x₁ is $2 including a $1 excise tax, the price of x₂ is $2, and Mr. Inflexible's budget is $120. Imagine substituting a lump- sum tax for the excise tax. If both taxes raise the same amount of tax revenue, the lump- sum tax is:

• A)$20.
• B)$30.
• C)$10.
• D)$50.

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Definitions:

Determinism

The philosophical belief that all events, including moral choices, are completely determined by previously existing causes.

Predictability

The characteristic of a process, principle, or system that enables it to be known or declared in advance, especially through the application of scientific or logical techniques.

Probability

A measure of the likelihood that an event will occur, often quantified as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Liberty

The state of being free within society from oppressive restrictions imposed by authority on one's way of life, behavior, or political views.