Recall Bonnie and Clyde from Problem 5

question 19

Multiple Choice

Recall Bonnie and Clyde from Problem 5. Suppose that their total profits are 72H, where H is the number of hours they work per year. Their utility functions are, respectively, U_B(C_B, H) = C_B - 0.03H² and U_C(C_C, H) = C_C - 0.03H², 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) 600.
• B) 700.
• C) 900.
• D) 250.
• E) 350.

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Definitions:

Explicit Costs

Direct, out-of-pocket payments for goods and services that are used in the production of other goods or services.

Accounting Profit

The financial profit of a business calculated by subtracting total expenses from total revenue, as shown in the company's income statement.

Economic Profit

A measure of profitability calculated by subtracting both explicit and implicit costs from total revenues, reflecting the true economic performance of a business.

Implicit Costs

Represent the opportunity costs of using resources that a firm already owns for production, instead of allocating them for other purposes.