A Parent Has Two Children Living in Cities with Different

question 20

Multiple Choice

A parent has two children living in cities with different costs of living.The cost of living in city B is 3 times the cost of living in city A.The child in city A has an income of $2,000 and the child in city B has an income of $6,000.The parent wants to give a total of $1,000 to her two children.Her utility function is U(C A, C B) = C A C B, where C A and C B are the consumptions of the children living in cities A and B respectively.She will choose to give

• A)the child in city B 3 times as much money as the child in city A.
• B)the child in city B 1.50 times as much money as the child in city A.
• C)each child $500, even though this will buy less goods for the child in city B.
• D)the child in city A 3 times as much money as the child in city B.
• E)the child in city A 1.50 times as much money as the child in city B.

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Definitions:

Negative Consequences

Adverse outcomes or effects resulting from actions, events, or decisions, which can impact individuals, groups, or societies.

Mental Labor

Work that involves cognitive effort and activities that require thinking, analyzing, and decision-making.

Manual Labor

Physical work done by people, especially in contrast to work done by machines or requiring mental effort.

Prestige

The value with which different groups of people are judged.