Question

How many units of consumption of good 1 maximizes utility?

Given the following: u = x;25 * 2,25 тах 21 > 0,22 > 0 8.t. 16* *1 + 36 * 22 < 1200 • MU; = 25 * • MU= .25 * *RE Equation Description: A consumer is attempting to maximize utility subject to a budget constraint. Utility equals the product of two terms: the first term is units of good 1 raised to the 25 power; and, the second term is units of good 2 raised to the 25 power. The price per unit of good 1 is $16; the price per unit of good 2 is $36; and, consumer income is $1200. Marginal utility of good 1 equals the product of three terms: the first term is.25; the second term is units of good 2 raised to the 25 power; the third term is units of good 1 raised to the - 75 power. Marginal utility of good 2 equals the product of three terms: the first term is.25; the second term is units of good 1 raised to the 25 power; the third term is units of good 2 raised to the - 75 power.

37.5 units of good 1

24.34 units of good 1

16.67 units of good 1

5 units of good 1

None of the above

50.5 units of good 1

How many units of consumption of good 2 maximizes utility?

None of the above

37.5 units of good 2

16.67 units of good 2

5 units of good 2

24.34 units of good 2

37.5 units of good 2

What is the highest level of utility the consumer can achieve?

500 utils

100 utils

50 utils

1 util

10 utils

None of the above

5 utils

Answer 1

Ans.1- (A)

Ans.2- ( C)

Ans.3- (G)

utility is maximired when MRS= 1 Here, MRS = my = 0.250 0.250 0.75 0.25 x,025 12-075 16 36 - 2 = 0.44%, 7 16 04, +36x2 = 1200 160, +36 (0.44%) = 1200 (2, -3757 X2=0.440, > 2= 16.67 [12=0.444442, = 0.4444 837.5 = 16.677 Maximum utility = f, xx 2) 0:25 = (37.5×16.67) 0.25 = 5