Joan has a monthly income of €100 that she allocates to two goods: meat and potatoes. Suppose meat costs €4 per pound and potatoes €2 per pound. Suppose also that her utility function is given by the equation U (M, P) = 2M + P. An outbreak of potato rot raises the price of potatoes to €4 per pound. What combination of meat and potatoes maximizes her utility? A. M = 25, P = 0 B. M = 20; P = 30 C. M = 20; P = 10 D. Any combination of meat and potatoes that satisfies her budget constraint
Joan has a monthly income of €100 that she allocates to two goods: meat and potatoes. Suppose meat costs €4 per pound and potatoes €2 per pound. Suppose also that her utility function is given by the equation U (M, P) = 2M + P. An outbreak of potato rot raises the price of potatoes to €4 per pound. What combination of meat and potatoes maximizes her utility? A. M = 25, P = 0 B. M = 20; P = 30 C. M = 20; P = 10 D. Any combination of meat and potatoes that satisfies her budget constraint
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 11SQ
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Question
Joan has a monthly income of €100 that she allocates to two goods: meat and potatoes. Suppose meat costs €4 per pound and potatoes €2 per pound. Suppose also that her utility function is given by the equation U (M, P) = 2M + P.
An outbreak of potato rot raises the price of potatoes to €4 per pound. What combination of meat and potatoes maximizes her utility?
A. |
M = 25, P = 0 |
|
B. |
M = 20; P = 30 |
|
C. |
M = 20; P = 10 |
|
D. |
Any combination of meat and potatoes that satisfies her budget constraint |
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