Ambrose's Brother Sebastian Has a Utility Function U(x₁, X₂)= 60x^1/2₁

question 54

Multiple Choice

Ambrose's brother Sebastian has a utility function U(x₁, x₂) = 60x^1/2₁ + x₂.His income is $165, the price of good 1 (nuts) is $6, and the price of good 2 (berries) is $1.How many units of nuts will Sebastian demand?

• A)25
• B)23
• C)35
• D)21
• E)48

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Definitions:

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenues.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed versus variable costs a company has.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's earnings before interest and taxes (EBIT) to a percentage change in sales, indicating the impact of fixed costs on profits.

High-low Method

The high-low method is an accounting technique used to estimate the variable and fixed costs of a business based on the highest and lowest levels of activity.