Recall Bonnie and Clyde from Problem 5

question 3

Multiple Choice

Recall Bonnie and Clyde from Problem 5. Suppose that their total profits are 140H, 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 - 0.02H², 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) 1,400.
• B) 2,100.
• C) 1,500.
• D) 650.
• E) 750.

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Definitions:

Linear

Pertaining to or resembling a line; in mathematics and statistics, a relationship is linear if it can be graphically represented as a straight line.

Statistically Significant

The likelihood that the difference in outcomes between groups is not due to chance, based on a predefined significance level.

Correlation Coefficient

A statistical measure that indicates the extent to which two variables fluctuate together.

Independent Variable

A variable in an experiment that is manipulated to determine its effect on the dependent variable.