Jane's Utility Function Is U(x, Y)= X +2y, Where X

question 2

Multiple Choice

Jane's utility function is U(x, y) = x +2y, where x is her consumption of good X and y is her consumption of good Y.Her income is $2.The price of Y is $2.The cost per unit of X depends on how many units she buys.The total cost of x units of X is the square root of x.

• A)The bundle (1/4, 3/4)is Jane's utility maximizing choice, given her budget.
• B)The bundle (1, 1/2)is Jane's utility maximizing choice, given her budget.
• C)Given her budget, Jane would maximize her utility by spending all of her income on good X.
• D)Given her budget, Jane would maximize her utility by spending all of her income on good Y.
• E)None of the above.

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Definitions:

Monetarists

Economists who assert that the dynamism in the money supply significantly shapes short-term national economic performance and price levels over the long haul.

Real Output

The total goods and services produced by an economy, measured in constant prices to adjust for inflation, synonymous with real GDP.

Incentives

Something that motivates or encourages an individual or group to perform or act in a certain way.

Savings

The portion of income not spent on current expenditures and set aside for future use.