Recall Lucy and Melvin from Problem 6

question 8

Multiple Choice

Recall Lucy and Melvin from Problem 6. 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 $24,000. 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 spend on public goods?

• A) $5,000
• B) $10,000
• C) $7,050
• D) $2,500
• E) There is not enough information here to be able to determine the answer.

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Definitions:

Lending Risk

This term describes the potential for financial loss due to a borrower's failure to make required payments on a debt, affecting the lender's financial stability.

Financial Reporting

The act of creating disclosures that inform management, investors, and government bodies of a company's financial position.

Comprehensive Income

The total change in equity for a reporting period, including all revenues, gains, expenses, and losses.

Financial Flexibility

The ability of a firm to adapt its capital structure or operations to cope with financial challenges or to seize investment opportunities.