if Charlie's utility function were X 3 A X B , if apples cost 60 cents each, and if bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves wheneverA) 3X B = 6X A .B) X B = 3X A .C) X B = X A .D) X A = 3X B .E) 60X A + 10X B = M.

Question

if Charlie's utility function were X  3 A  X B , if apples cost 60 cents each, and if bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves wheneverA) 3X B  = 6X A .B) X B  = 3X A .C) X B  = X A .D) X A  = 3X B .E) 60X A  + 10X B  = M.

Grace McFarlane · Accepted Answer

Final Answer : A, Explanation :  The condition for tangency between the budget line and an indifference curve is that the marginal rate of substitution (MRS) equals the price ratio. For the utility function X 3 A X B , MRS = 3X A 2 /X B . The price ratio is 60/10 = 6. Setting MRS equal to the price ratio gives 3X A 2 /X B  = 6, which simplifies to 3X B  = 6X A .

if Charlie's utility function were X ³_AX_B, if apples cost 60 cents each, and if bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves whenever

A) 3X_B = 6X_A.
B) X_B = 3X_A.
C) X_B = X_A.
D) X_A = 3X_B.
E) 60X_A + 10X_B = M.

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Learning Objectives

Related questions

if Charlie's utility function were X 3A XB, if apples cost 60 cents each, and if bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves wheneverA) 3XB = 6XA.B) XB = 3XA.C) XB = XA.D) XA = 3XB.E) 60XA + 10XB = M.

Definitions

Learning Objectives

Learning Objectives

Related questions

if Charlie's utility function were X ³_AX_B, if apples cost 60 cents each, and if bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves whenever

A) 3X_B = 6X_A.
B) X_B = 3X_A.
C) X_B = X_A.
D) X_A = 3X_B.
E) 60X_A + 10X_B = M.