Lucy's Utility Function Is 2X_L + G and Melvin's Utility

question 19

Multiple Choice

Lucy's utility function is 2X_L + G and Melvin's utility function is X_MG, where G is their expenditures on the public goods they share in their apartment and where X_L and X_M are their respective private consumption expenditures. The total amount they have to spend on private goods and public goods is $30,000. They agree on a Pareto optimal pattern of expenditures in which the amount that is spent on Lucy's private consumption is $9,000. How much do they spent on public goods?

• A) $7,000
• B) $14,000
• C) $8,050
• D) $3,500
• E) There is not enough information here to be able to determine the answer.

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Definitions:

Avoid Paying

Strategies or actions taken to minimize or evade expenses, taxes, or other financial obligations.

Luxury Tax

A tax imposed on expensive goods and services, often considered non-essential, as a means of raising government revenues without placing the burden on essential items.

Tax Incidence

The distribution of the economic burden of a tax between buyers and sellers, depending on the elasticity of demand and supply.

Net Profits

The actual profit after working expenses not included in the calculation of gross profit have been paid.