Wilma Q Has a Utility Function U(x₁, X₂) = X²₁

question 56

Multiple Choice

Wilma Q. has a utility function U(x₁, x₂) = x²₁ + 1.5x₁x₂ + 30x₂. The prices are p₁ = $1 and p₂ = $1. For incomes between $20 and $60, the Engel curve for good 2 is

• A) upward sloping.
• B) downward sloping.
• C) vertical.
• D) upward sloping for incomes between $20 and $40 and downward sloping between $40 and $60.
• E) downward sloping for incomes between $20 and $40 and upward sloping between $40 and $60.

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Definitions:

Concept Hierarchy

A system of organizing concepts from the most general to the most specific, facilitating understanding and learning by structuring knowledge in a hierarchical manner.

Ultimatum Game

A game in economic experiments where two players decide on how to divide a sum of money; refusal by one player results in neither player receiving anything.

Rational Self-Interest

The principle that individuals will make decisions that they perceive to be the best for themselves, maximizing their own benefit.

Reflective Judgment

The process of critically evaluating the validity of various claims and evidence before forming a conclusion or judgment.