NARRBEGIN: Exhibit 6-9
Exhibit 6-9

-At point a in Exhibit 6-9, the monetary value that approximates the total utility received is
A) $5
B) $9
C) $20
D) $26
E) $45

Question

NARRBEGIN: Exhibit 6-9
Exhibit 6-9
 
-At point a in Exhibit 6-9, the monetary value that approximates the total utility received is
A) $5 
B) $9 
C) $20 
D) $26 
E) $45

Quizplus · Accepted Answer

At point a, the consumer is consuming 4 units of X and 2 units of Y, which gives a total utility of (4^0.5)*(2^0.5) = 4. Therefore, the monetary value that approximates the total utility received is $26, which is the point where the budget constraint intersects the highest indifference curve tangent to it. This can be seen by drawing a line tangent to the highest possible indifference curve (in this case, the one labelled "10" on the graph) and moving it until it is just touching the budget constraint. The point of intersection is point D, which has a value of $26.

NARRBEGIN: Exhibit 6-9 Exhibit 6-9