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

question 16

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 $19 per week and was paying a price of $8 per pair of earrings, then if the price of earrings rose to $10, the compensating variation of that price change (measured in dollars per week) would be closest to

• A) $4.22.
• B) $9.44.
• C) $3.45.
• D) $8.44.
• E) $7.44.

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Definitions:

Cost System

An accounting framework used for recording, tracking, and managing costs associated with a company's operations, products, or services.

Processing Department

A segment within a factory where a particular process, phase of production, or type of operation is carried out.

Work In Process

Units of product that are only partially complete and will require further work before they are ready for sale to the customer.

Total Amount

The sum total of all quantities or values, usually referring to the final sum on invoices, bills, or financial statements.