Astrid's Utility Function Is U(H_A, C_A)= H_AC_A

question 16

Multiple Choice

Astrid's utility function is U(H_A, C_A) = H_AC_A.Birger's utility function is min{H_B, C_B}.If Astrid's initial endowment is no cheese and 8 units of herring and if Birger's initial endowments are 7 units of cheese and no herring, then where p is a competitive equilibrium price of herring and cheese is the numeraire, demand equals supply in the herring market.This implies that

• A)7/p + 8 / 2p = 8.
• B)7/(p + 1)+ 4 = 8.
• C)8/7 = p.
• D)7/8 = p.
• E)min{8, 7} = p.

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Definitions:

Tax Benefits

Financial advantages gained from various deductions, credits, or exemptions that reduce the amount of income subject to tax.

Unused Debt Capacity

The additional amount of borrowable funds a company can obtain without reaching its maximum debt threshold. It's an indicator of additional leverage a company may use in the future.

Synergistic Gains

Refers to the increased value or improved performance resulting from the combination or cooperation of two entities, beyond what they could achieve individually.