Suppose That Eugene Cares Only About Action Figures and Ice

question 125

Multiple Choice

Suppose that Eugene cares only about action figures and ice cream. His utility function is U = A^0.33C^0.67, where A is the number of action figures he owns and C is the number of scoops of ice cream he eats. The price of action figures is $10, and the price of ice cream is $4. Eugene has a budget of $100. Which levels of A and C maximize Eugene's utility?

• A) A = 6.66 and C = 8.33
• B) A = 3.33 and C = 16.66
• C) A = 10 and C = 0
• D) A = 6 and C = 10

---

Definitions:

Gross Income

The total income from all sources before any deductions or taxes are applied.

Net Income

The total earnings of a person or company after all expenses and taxes have been subtracted from total revenue.

IRS Method

A specific approach or set of guidelines established by the Internal Revenue Service for calculating taxes, deductions, and credits.

Mortgage Interest

The amount charged for borrowing money to purchase property, which can often be deducted from income taxes under certain conditions.