For Every Two Boxes of Strawberries That She Consumes, Millicent

question 16

Multiple Choice

For every two boxes of strawberries that she consumes, Millicent insists on having one pitcher of cream.She does not, however, insist on consuming the same amount every week.Her utility functions is U =min{s₁, 2c₁}min{s₂, 2c₂}, where s₁ and s₂ are the number of boxes of strawberries she consumes this week and next week and c₁ and c₂ are the number of pitchers of cream she consumes this week and next.Strawberries cost $2 a box and cream costs $1 a pitcher.She has a present value of $100 to spend on these goods in the next two weeks.The weekly interest rate is 1%.How many boxes of strawberries will she consume this week?

• A)10
• B)20
• C)22
• D)14.1
• E)6.06

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Definitions:

Optimal Tax

A tax designed to generate government revenue with the minimum economic distortion or welfare loss.

Marginal Social Cost

The total cost to society of producing an additional unit of a good or service, including both the cost to the producer and the cost of any negative externalities associated with production.

Marginal Social Benefit

Marginal social benefit is the additional gain to society as a whole from producing one more unit of a good or service.

Emissions Tax

A tax levied on the emission of pollutants, aimed at reducing the level of harmful emissions released into the environment.