In Problem 7, Harry Mazzola Has the Utility Function U(x₁

question 7

Multiple Choice

In Problem 7, Harry Mazzola has the utility function U(x₁, x₂) = min{x₁ + 2x₂, 2x₁ + x₂}. He has $40 to spend on corn chips and french fries. If the price of corn chips is $2 per unit and the price of french fries is $2 per unit, then Harry will

• A) definitely spend all of his income on corn chips.
• B) consume at least as many french fries as corn chips but might consume both.
• C) consume at least as many corn chips as french fries but might consume both.
• D) definitely spend all of his income on french fries.
• E) consume equal amounts of french fries and corn chips.

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Definitions:

Output Per Week

The total product or service quantity produced by a company or economy in a week.

Monopoly Equilibrium

The state in which a monopolistic company determines its price and output level where its marginal cost equals its marginal revenue.

Competitive Equilibrium

A state in a market where supply equals demand, resulting in an equilibrium price and quantity that clears the market.

Profit-Maximizing

The process or strategy of adjusting production and sales to achieve the highest possible profit levels.