Ike's utility function is U(x, y) = xy. Ike consumes 2 units of x and 8 units of y.
A) Ike would be willing to make small exchanges of x for y in which he would give up 4 units of x for every unit of y he got.
B) Ike would be willing to trade away all of his x for y as long as he got more than 4 units of y for every unit of x he gave up.
C) Ike will always be willing to make trades at any price if he does not have equal amounts of the two goods.
D) Ike likes x and y equally well so he is always willing to exchange 1 unit of either good for more than 1 unit of the other.
E) None of the above.

Question

Quizplus · Accepted Answer

The Answer of Ike's utility function is U(x, y) = xy. Ike consumes 2 units of x and 8 units of y.
A) Ike would be willing to make small exchanges of x for y in which he would give up 4 units of x for every unit of y he got.
B) Ike would be willing to trade away all of his x for y as long as he got more than 4 units of y for every unit of x he gave up.
C) Ike will always be willing to make trades at any price if he does not have equal amounts of the two goods.
D) Ike likes x and y equally well so he is always willing to exchange 1 unit of either good for more than 1 unit of the other.
E) None of the above.

Ike's Utility Function Is U(x, Y) = Xy