suppose Wilfred, a typical citizen, has the utility function U(m, d, h)= m + 13d² - d² - 4h, where d is the number of hours per day that he spends driving around, h is the average number of hours per day spent driving around by other people in his home town, and m is the amount of money he has left to spend on other stuff besides gasoline and auto repairs.Gas and auto repairs cost $1 per hour of driving.If each citizen believes that their own driving will not affect the amount of driving done by others, they will all drive D₁ hours per day.If all citizens drive to maximize the utility of a typical citizen, they will all drive D₂ hours per day, where A)D₁ = 6 and D₂ = 4. B)D₁ = D₂ = 6. C)D₁ = 8 and D₂ = 5. D)D₁ = 9 and D₂ = 0. E)D₁ = 6 and D₂ = 2.

Question

Quizplus · Accepted Answer

The correct answer is based on the assumption that individuals aim to maximize their utility given the utility function U(m, d, h). The utility function suggests a trade-off between driving (d), the average driving by others (h), and money left for other expenses (m). The choices given imply different scenarios of individual versus collective optimization. Choice A suggests a scenario where individuals drive more when not considering the collective impact (6 hours) but drive less when optimizing for the collective utility (4 hours), which aligns with the principle of externalities affecting optimal individual behavior.

Suppose Wilfred, a Typical Citizen, Has the Utility Function U(m