If Charlie's utility function were X⁶_AX_B and if apples cost 40 cents each and bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves whenever A) 6X_B = 4X_A. B) X_A = 6X_B. C) X_B = X_A. D) X_B = 6X_A. E) 40X_A + 10X_B = M.

Question

Quizplus · Accepted Answer

The tangency condition for utility maximization is when the marginal rate of substitution (MRS) equals the price ratio. For the given utility function, MRS = 6X_B / X_A. The price ratio is 40/10 = 4. Setting MRS equal to the price ratio gives 6X_B / X_A = 4, which simplifies to 6X_B = 4X_A.

If Charlie's Utility Function Were X6AXB and If Apples Cost

If Charlie's Utility Function Were X⁶_AX_B and If Apples Cost