Charlie's utility function is U(x_A, x_B)= x_Ax_B.If Charlie's income is $40, the price of apples is $4, and the price of bananas is $2, how many apples are there in the best bundle that Charlie can afford? A)10 B)12 C)8 D)9 E)5

Question

Quizplus · Accepted Answer

Given the utility function is not clearly defined due to formatting issues, we can still solve the problem using the budget constraint. Charlie has $40 to spend, and the price of apples is $4 each. Without knowing the exact utility function, we can calculate the maximum number of apples Charlie can afford if he spends all his money on apples: $40/$4 = 10 apples. However, since 10 is not an option, and considering the need for an optimal bundle that includes both apples and bananas, we look for the closest number less than 10, which is option E) 5. This suggests a misunderstanding in the question's premise or a mistake in the interpretation without the utility function's specifics. Nonetheless, based on the provided options and the calculation mistake, 5 is the closest logical choice under the assumption that Charlie must also purchase bananas, hence not spending all his income on apples.

Charlie's Utility Function Is U(xA, XB)= XAxB

Charlie's Utility Function Is U(x_A, X_B)= X_Ax_B