Lorenzo Lives on X and Y Alone

question 7

Multiple Choice

Lorenzo lives on x and y alone. His utility function is U(x, y) = min{ 3x + 4y, 7y}. The prices of both goods are positive. He will

• A) never buy more x than y.
• B) buy equal amounts of the two goods.
• C) always buy more y than x.
• D) always buy more x than y.
• E) More than one of the above is true.

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Definitions:

Utility

A measure of satisfaction, usefulness or value that a consumer receives from any good or service.

Utility

In economics, the total satisfaction received from consuming a good or service.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay.

Marginal Utility

The extra pleasure or benefit a customer receives from purchasing an additional unit of a product or service.