On the Planet Hyperion Every Consumer Who Has Ever Lived

question 12

Multiple Choice

On the planet Hyperion every consumer who has ever lived has a utility function U(x, y) = min{x, 2y}. The currency of Hyperion is the doggerel. In 1850 the price of x was 1 doggerel per unit and the price of y was 2 doggerels per unit. In 2000, the price of x was 11 doggerels per unit and the price of y was 4 doggerels per unit. The Paasche price index of prices in 2000 relative to prices in 1850 is

• A) 6.50.
• B) 5.
• C) 2.75.
• D) 3.75.
• E) not possible to determine without further information.

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Definitions:

Tax Revenue

The income collected by governments from taxes, which funds public services such as infrastructure, healthcare, and education.

Cheesecake

A sweet dessert consisting of one or more layers, with the main and thickest layer containing a mixture of soft, fresh cheese, eggs, and sugar.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, resulting in market balance.

Value-Added Tax

A type of consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.