Recall Lucy and Melvin from Problem 6

question 17

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 $6,000. How much do they spend on public goods?

• A) $6,000
• B) $3,000
• C) $6,050
• D) $12,000
• E) There is not enough information here to be able to determine the answer.

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Definitions:

Motorcycle

A two-wheeled vehicle powered by an engine, designed for individual or dual riders.

Annuity Contract

A financial product offered by insurance companies that provides a series of payments at regular intervals for a specified period or for life.

Present Value

Today's value of a future monetary amount or a string of cash flows, considering a specified rate of return.

Periodic Interest Rate

The interest rate charged or earned over a particular period of time, often monthly, quarterly, or annually, as opposed to the annual percentage rate (APR).