Suppose That There Are Two Goods, X and Y

question 33

Multiple Choice

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is $5, and the price of Y is P. Income is $60. The demand for Y as a function of P is X = ____.

• A) 350/P
• B) 35/P
• C) 20/P
• D) 2P

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Definitions:

Social Cost

The total cost to society as a whole due to an activity or decision, including both direct costs and indirect externalities.

Congested Highway

A highway or roadway that experiences traffic congestion due to a high volume of vehicles, often leading to slower speeds and longer travel times.

Negative Externality

A cost that affects a party who did not choose to incur that cost, often arising from production or consumption of goods and services.

Socially Optimal Quantity

The level of production or consumption that maximizes social welfare, considering all costs and benefits to society.