Bernice in Problem 5 Has the Utility Function U(x, Y)

question 9

Multiple Choice

Bernice in Problem 5 has the utility function u(x, y) = min{x, y}, where x is the number of pairs of earrings she buys per week and y is the number of dollars per week she has left to spend on other things. (We allow the possibility that she buys fractional numbers of pairs of earrings per week.) If she originally had an income of $17 per week and was paying a price of $3 per pair of earrings, then if the price of earrings rose to $7, the compensating variation of that price change (measured in dollars per week) would be closest to

• A) $8.50.
• B) $17.
• C) $35.
• D) $34.
• E) $33.

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Definitions:

Direct Ownership

A situation in which an entity has full control and claim over an asset, without any intermediaries.

Most Risk

A term that could be interpreted in various contexts, but it is not a standard business or marketing key term. NO.

Licensing

The granting of a right or permission by one party to another for the use of a product, service, or intellectual property.

Exporting

The sale of goods or services produced in one country to customers in another country.