Ike's Utility Function Is U(x, Y) = Xy

question 28

Multiple Choice

Ike's utility function is U(x, y) = xy. Ike consumes 2 units of x and 8 units of y.

• A) Ike would be willing to make small exchanges of x for y in which he would give up 4 units of x for every unit of y he got.
• B) Ike would be willing to trade away all of his x for y as long as he got more than 4 units of y for every unit of x he gave up.
• C) Ike will always be willing to make trades at any price if he does not have equal amounts of the two goods.
• D) Ike likes x and y equally well so he is always willing to exchange 1 unit of either good for more than 1 unit of the other.
• E) None of the above.

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Definitions:

Contrast Assumption

The assumption that objects have only one label. Also known as the mutual exclusivity assumption (if a word means one thing, then it cannot mean another).

One Label

The concept of using a single term or classification to describe or identify something, often simplifying complex attributes.

Cognitive Sophistication

The advanced level of cognitive development characterized by complex thinking processes, such as abstract reasoning and problem-solving capabilities.

Preoperational Thought

Refers to a stage in Piaget's theory of cognitive development where children aged 2 to 7 years think symbolically but are not yet able to perform operations or manipulate information in a logical way.