Asked by Hallie Canto on Jul 29, 2024

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Charlie's utility function is U(xA, xB)  xAxB.If Charlie's income were $40, the price of apples were $2, and the price of bananas were $6, how many apples would there be in the best bundle that Charlie could afford?

A) 4
B) 20
C) 5
D) 6
E) 10

Utility Function

A mathematical representation describing how a consumer ranks different bundles of goods based on the level of satisfaction each bundle provides.

Budget Constraint

Describes the combinations of goods and services that a consumer can purchase given their income and the prices of the goods.

Income

Earnings received by an individual or entity, typically in the form of wages, salaries, or investment returns, over a specified period.

  • Invoke the utility maximization approach to discover the ideal mix of consumption items.
  • Assess how fluctuations in price levels influence the consumption choices of individuals.
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CL
Cristina LariosAug 01, 2024
Final Answer :
E
Explanation :
Given the utility function is not clearly defined due to the formatting issue, we can still solve the problem using the budget constraint. Charlie's budget is $40. With apples priced at $2 and bananas at $6, the best bundle Charlie can afford depends on maximizing utility within this budget constraint. Without specific utility preferences, we assume Charlie spends the entire budget. The correct answer involves finding a combination of apples and bananas that fits this budget. However, since the question asks specifically for the number of apples, we focus on that. If Charlie were to spend the entire budget on apples, at $2 each, he could afford 20 apples ($40/$2 = 20). This doesn't consider the utility maximization because we can't calculate it from the given information, but it gives the maximum number of apples Charlie could afford, making E the correct choice based on the information provided.