Robinson Crusoe Has Exactly 14 Hours Per Day to Spend

question 17

Multiple Choice

Robinson Crusoe has exactly 14 hours per day to spend gathering coconuts or catching fish. He can catch 4 fish per hour or he can pick 12 coconuts per hour. His utility function is U(F, C) = FC, where F is his consumption of fish and C is his consumption of coconuts. If he allocates his time in the best possible way between catching fish and picking coconuts, his consumption will be the same as it would be if he could buy fish and coconuts in a competitive market where the price of coconuts is $1.

• A) His income is $168 and the price of fish is $3.
• B) His income is $56 and the price of fish is $4.
• C) His income is $224 and the price of fish is $4.
• D) His income is $168 and the price of fish is $.25.
• E) His income is $112 and the price of fish is $.25.

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Definitions:

Unrealized Profits

Profits that have been generated on paper through investments and other financial instruments but have not yet been realized through actual transactions.

Journal Entry

A recorded transaction in the financial accounting system, documenting the debits and credits necessary to maintain the balance sheet's integrity.

Inventory

Items that a company holds for the purpose of selling in the normal course of business, or materials used in the production of goods to be sold.

Dividends

Funds disbursed by a company to its stockholders, typically from earnings.