Suppose That Paul and David Have Utility Functions U

question 19

Multiple Choice

Suppose that Paul and David have utility functions U = 5A_P + O_P and U = A_D + 3O_D, respectively, where A_P and O_P are Paul's consumptions of apples and oranges and A_D and O_D are David's consumptions of apples and oranges.The total supply of apples and oranges to be divided between them is 12 apples and 20 oranges.The "fair" allocations consist of all allocations satisfying

• A)A_D= A_P and O_D = O_P.
• B)A_D + O_D is at least 16 and A_S + O_S is at least 16.
• C)10A_P + 2O_P is at least 80 and 2A_D + 6O_D is at least 72.
• D)5A_P+ O_P is at least 80 and 2A_D + 3O_D is at least 72.
• E)5A_P + O_P is at least A_D + 3O_D and A_D + 3O_D is at least 5A_P + O_P.

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Definitions:

Direct Method

A cost allocation method that assigns service department costs directly to production departments without intermediate steps.

Income Statement

A financial statement that shows a company's financial performance over a specific period, detailing revenues, expenses, and net income.

Income Taxes Payable

A current liability account found on the balance sheet that represents the amount of income taxes owed to governmental authorities but not yet paid.

Income Tax Expense

The cost of income taxes a company incurs, calculated based on the taxable income and tax rates applicable, reflecting the company's obligation to government revenue services.