Professor Nightsoil's Utility Function Is U_N(B_N, P_N)= B_N + 4p^1/2_N

question 7

Multiple Choice

Professor Nightsoil's utility function is U_N(B_N, P_N) = B_N + 4p^1/2_N and Dean Interface's utility function is U_I(B_I, P_I) + B_I + 2p^1/2_I.If Nightsoil's initial endowment is 6 bromides and 20 platitudes and if Interface's initial endowment is 2 bromides and 10 platitudes, then at any Pareto efficient allocation where both persons consume positive amounts of both goods,

• A)Nightsoil consumes the same ratio of bromides to platitudes as Interface.
• B)Interface consumes 6 platitudes.
• C)Interface consumes 4 bromides
• D)Interface consumes 4 bromides.
• E)Interface consumes 2 platitudes.

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Definitions:

Marginal Tax Rate

The tax rate that applies to the next dollar of taxable income, indicating the percentage of any additional earnings that will be paid in taxes.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount goes up, making higher earners pay a larger percentage of their income than lower earners.

Government Borrowing

The process by which a government finances its expenditure by borrowing money, typically through issuing bonds.

Public Expenditures

Expenses made by the government for the development, maintenance of public services, and to support economic activities.