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:

Demand Function

A mathematical relationship expressing the quantity of an item demanded at various prices.

Marginal Costs

The amount spent to produce a further unit of a good or service.

Deadweight Loss

A loss of economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable.

Coefficient Of Monopsony

A measure indicating the degree of market power held by a single buyer in a market.