Remember Bonnie and Clyde from Your Workbook? Suppose That Their

question 21

Multiple Choice

Remember Bonnie and Clyde from your workbook? Suppose that their total profits are 112H, where H is the number of hours they work per year.Their utility functions are, respectively, U_B(C_B, H ) = C_B - 0.02H ² and U_C(C_C, H ) = C_C - 0.02H ², where C_B and C_C are their private goods consumptions and H is the number of hours they work per year.If they find a Pareto optimal choice of hours of work and income distribution, the number of hours they work per year must be

• A)1,400.
• B)750.
• C)1,500.
• D)650.

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Definitions:

Payoff

The return or outcome received from an investment or action.

Convertible Bond

A type of bond that can be converted into a predetermined number of the issuing company's shares at certain times during its life, usually at the discretion of the bondholder.

Conversion Value

The value of a convertible security if it is converted into the underlying stock.

Straight Debt

Traditional corporate bonds that have a fixed interest rate and mature on a specific date, without any conversion or exchange rights into other forms of securities.