A.Bundle C is preferred to Bundle A because Bundle C represents a more balanced Bundle. Do you agree or disagree with this statement and why?Calculate the MRSXY between points A and B, and between points C and D. Interpret your computed values.What assumption about preferences would allow you to say that Bundle E is preferred to Bundle B? Briefly explain. Bundle E has one less cheeseburger than Bundle D. What assumption(s) would still allow you to say that Bundle E is preferred to Bundle D? Briefly explain.B. Consider the utility function of individual A given by UA (X,Y) = X0.5Y0.5 in answering the items below:1.Calculate the marginal utility for each good (MUX & MUY) of individual A and the marginal rate of substitution (MRSXY). Interpret your computed values. 2. If PX = 0.5, PY = 1, and I = 10, solve for X*, Y*, and U* using the Lagrange Multiplier Method 10BU.245cheeseburgerspearl shakes

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Answered: A. Bundle C is preferred to Bundle A…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Bundle C is preferred to Bundle A because Bundle C represents a more balanced Bundle. Do you agree or disagree with this statement and why?
Calculate the MRSXY between points A and B, and between points C and D. Interpret your computed values.
What assumption about preferences would allow you to say that Bundle E is preferred to Bundle B? Briefly explain.
Bundle E has one less cheeseburger than Bundle D. What assumption(s) would still allow you to say that Bundle E is preferred to Bundle D? Briefly explain.

B. Consider the utility function of individual A given by UA (X,Y) = X0.5Y0.5 in answering the items below:

1.Calculate the marginal utility for each good (MUX & MUY) of individual A and the marginal rate of substitution (MRSXY). Interpret your computed values.

2. If PX = 0.5, PY = 1, and I = 10, solve for X*, Y*, and U* using the Lagrange Multiplier Method