Mary Granola's utility function is U(x, y) = min{x + 2y, y + 2x}. Mary maximizes her utility subject to a budget constraint. If she chooses the bundle (5, 6), then the price of x must be exactly twice the price of y.

Question

Quizplus · Accepted Answer

If Mary chooses the bundle (5, 6), her utility would be U(5,6)=min{5+2(6),6+2(5)}=min{17,16}=16.
Let the price of y be p, then the price of x must be 2p. Mary's budget constraint can be written as 5(2p)+6p=16p. Solving for p, we get p=1. Therefore, the price of x is 2p=2, and the price of y is p=1 as given in the problem. So option A is true.

Mary Granola's Utility Function Is U(x, Y) = Min{x