Recall Bonnie and Clyde from Problem 5

question 4

Multiple Choice

Recall Bonnie and Clyde from Problem 5. Suppose that their total profits are 256H, where H is the number of hours they work per year. Their utility functions are, respectively, U_B(C_B, H) = C_B - 0.04H² and U_C(C_C, H) = C_C - 0.04H², where C_B and C_C are their private goods consumptions and H is the number of hours they work per year. If they find a Pareto optimal choice of hours of work and income distribution, the number of hours they work per year is

• A) 2,400.
• B) 1,600.
• C) 1,700.
• D) 750.
• E) 850.

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Definitions:

Partial Equity Method

An accounting method that recognizes the initial investment at cost and incorporates the investor's share of the investee's net income or losses to some extent, not fully as in the full equity method.

Noncontrolling Interest

A minority share of ownership in a subsidiary that is not enough to control its operations, held by investors outside of the parent company.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue, indicating the company's financial performance over a specified period.

Acquisition Method

A set of accounting procedures used for consolidating the financial statements of a parent company and its subsidiaries.