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Given the Utility function U(X,Y) = X.5 + Y.5 e.    If Price of X equals 1 and...

Given the Utility function U(X,Y) = X.5 + Y.5

e.    If Price of X equals 1 and price of Y equals 1 and income equals $200, what utility maximizing quantity of x and quantity of y will the consumer choose.

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Answer #1

Ans. e) The utility maximization level is MRSxy = Px/Py ( where MRSxy = MUx/ MUy )

The consumer will choose the utility-maximizing level of 100 units of x good and 100 units of y good.

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