Bernice Has the Utility Function U(x, Y) = Min{x, Y}

question 18

Multiple Choice

Bernice has the utility function u(x, y) = min{x, y}, where x is the number of pairs of earrings she buys per week and y is the number of dollars per week she has left to spend on other things. (We allow the possibility that she buys fractional numbers of pairs of earrings per week.) If she originally had an income of $10 per week and was paying a price of $8 per pair of earrings, then if the price of earrings rose to $13 per pair, the compensating variation of that price change (measured in dollars per week) would be closest to

• A) $3.57.
• B) $5.56.
• C) $12.11.
• D) $11.11.
• E) $10.11.

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Definitions:

Deviance

The violation of social norms, which can range from criminal acts to minor infractions of manners.

Prognosis

A forecast of the likely course and outcome of a disease or ailment.

Diagnosis

Distinguishing one illness from another.

Cultural Norms

Shared beliefs and behaviors that are considered acceptable or standard within a specific society or group.