if Charlie's utility function were X ³_AX_B, if apples cost 60 cents each, and if bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves whenever A)3X_B = 6X_A. B)X_B = 3X_A. C)X_B = X_A. D)X_A = 3X_B. E)60X_A + 10X_B = M.

Question

Quizplus · Accepted Answer

The condition for tangency between the budget line and an indifference curve is that the marginal rate of substitution (MRS) equals the price ratio. For the utility function X³_AX_B, MRS = 3X_A²/X_B. The price ratio is 60/10 = 6. Setting MRS equal to the price ratio gives 3X_A²/X_B = 6, which simplifies to 3X_B = 6X_A.

If Charlie's Utility Function Were X 3A XB, If Apples

If Charlie's Utility Function Were X ³_AX_B, If Apples