**Quasilinear Example**3. Frank’s utility is given by $ U = \ln(X) + 2Y $, where $ MU_x = 10/x $ and $ MU_y = 2 $. Prices are $ P_x = 2 $, $ P_y = 4 $ and $ M = 30 $. a. What is Frank’s MRS at $ X = 5 $ and $ Y = 5 $? b. Why is $ X = 5 $ and $ Y = 5 $ not his optimal bundle? c. Find his optimal consumption bundle. d. Frank’s income increases by $16. He now consumes $ X = \ldots $ and $ Y = \ldots $.

Answered: 3. Frank's utility is given by U =…

3. Frank's utility is given by U = InX+2Y, where Mux = 10/x and MU 2. Prices are Px = 2, Px=4 and M = 30. a. What is Frank's MRS at X = 5 and Y = 5?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

**Quasilinear Example**

3. Frank’s utility is given by $ U = \ln(X) + 2Y $, where $ MU_x = 10/x $ and $ MU_y = 2 $. Prices are $ P_x = 2 $, $ P_y = 4 $ and $ M = 30 $.

a. What is Frank’s MRS at $ X = 5 $ and $ Y = 5 $?

b. Why is $ X = 5 $ and $ Y = 5 $ not his optimal bundle?

c. Find his optimal consumption bundle.

d. Frank’s income increases by $16. He now consumes $ X = \ldots $ and $ Y = \ldots $.

Expert Solution

Step 1

utility depends on the number of commodities which are consumed by the consumer. The marginal utility shows the change in the total utility when one additional unit of commodity is consumed by the consumer.

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