Harmon's Utility Function Is U(x₁, X₂)= X₁x₂

question 11

Multiple Choice

Harmon's utility function is U(x₁, x₂) = x₁x₂.His income is $100.The price of good 2 is p₂ = 4.Good 1 is priced as follows.The first 15 units cost $4 per unit and any additional units cost $2 per unit.What consumption bundle does Harmon choose?

• A)(12.5, 12.5)
• B)(25, 12.5)
• C)(12.5, 25)
• D)(15, 10)
• E)None of the above.

---

Definitions:

Planned Economy

An economic system in which the government or a central authority makes all decisions regarding the production and distribution of goods and services.

Barter Economy

An economic system where goods and services are exchanged directly for other goods and services without the use of money.

Coincidence of Wants

A situation in a barter system where two parties each hold an item the other wants, enabling a direct exchange without money.

Medium of Exchange

A mediating tool or mechanism that assists in the buying, selling, or exchanging of items among individuals.