Charlie's Utility Function Is U(x_A, X_B)=x_Ax_B

question 23

Multiple Choice

Charlie's utility function is U(x_A, x_B) =x_Ax_B.If Charlie's income were $40, the price of apples were $4, and the price of bananas were $6, how many apples would there be in the best bundle that Charlie could afford?

• A)8
• B)10
• C)12
• D)9
• E)5

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Definitions:

Expected Return

The average of all possible returns for an investment, weighted by the likelihood of each outcome.

Risky Asset

Asset that provides an uncertain flow of money or services to its owner.

Risk-free Asset

A financial instrument that is considered to have minimal risk of financial loss, such as government bonds.

Intercept

A term in mathematics and economics indicating the value where a function or line crosses an axis on a graph.