Remember Bonnie and Clyde from Your Workbook? Suppose That Their

question 18

Multiple Choice

Remember Bonnie and Clyde from your workbook? Suppose that their total profits are 40H, where H is the number of hours they work per year. Their utility functions are, respectively, U_B(C_B, H) = C_B - 0.02H² and U_C(C_C, H) = C_C - 0.03H², where C_B and C_C are their private goods consumptions and H is the number of hours they work per year. If they find a Pareto optimal choice of hours of work and income distribution, the number of hours they work per year must be

• A)500
• B)400
• C)150
• D) 250.

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Definitions:

Opportunity Cost

The cost of foregone alternatives, or what is given up in order to pursue a certain action or decision.

Budget

An estimate of income and expenditure for a set period, often used by governments, businesses, and individuals to plan financial operations.

Bananas

A staple fruit globally known for its yellow peel and soft, sweet flesh, often grown in tropical regions.

Productive Resources

The inputs used in the production of goods and services, typically classified as land, labor, capital, and entrepreneurship.