Jane's utility function is represented as: U = F^0.5 C^0.5,F is quantity of food and C is quantity of clothing.If her budget constraint is represented as: 120 = 2F + C,her optimal bundle of consumption should be A)(40F,40C). B)(20F,60C). C)(50F,50C). D)(45F,20C).

Question

Quizplus · Accepted Answer

Given Jane's utility function and budget constraint, the optimal bundle maximizes her utility subject to her budget. The utility function does not directly depend on the quantities of food (F) and clothing (C), but the budget constraint (120 = 2F + C) suggests a trade-off between F and C. The correct answer, (40F,40C), is the only option that satisfies the budget constraint (2*40 + 40 = 120) and implies a balanced consumption of food and clothing, which is typically preferred in utility maximization problems without specific utility functions provided.

Jane's Utility Function Is Represented As: U = F0

Jane's Utility Function Is Represented As: U = F⁰