Peter's Utility Is U(c, D, H) = 2c + 9d

question 8

Multiple Choice

Peter's utility is U(c, d, h) = 2c + 9d - d² - 6h, where d is the number of hours per day that he spends driving around, h is the number of hours per day spent driving around by other people in his home town, and c is the amount of money he has left to spend on other stuff besides gasoline and auto repairs. Gas and auto repairs cost $.50 per hour of driving. All the people in Peter's home town have the same tastes. If each citizen believes that his own driving will not affect the amount of driving done by others, they will all drive D₁ hours per day. If they are all drive the same amount, they would all be best off if each drove D₂ hours per day, where

• A) D₁ = 4 and D₂ = 1.
• B) D₁ = 7 and D₂ = 0.
• C) D₁ = 6 and D₂ = 2.
• D) D₁ = D₂ = 4.
• E) D₁ = 4 and D₂ = 0.

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Definitions:

Fetal Development

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The process by which a fertilized egg attaches itself to the lining of the uterus and begins to grow.

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