Mathematics, 07.10.2020 16:01, herchellann302

Ernie has two cell phones and obtains positive utility from talking on both. His utility using AT&T (x1) and Verizon (x2) is given by: U(x1, x2)= x_1 ^0.5+ x_2^0.5 The price of calls at AT&T is $1 per unit and the price of calls at Verizon is $4 per unit. Ernie spends $2000 on phone calls per year a) What is Ernie’s optimal bundle? (Hint: You may use the Lagrange Method or simply set the MRS equal to the price ratio, and plug this into the budget constraint) b) What is Ernie’s utility at this optimal bundle?

c) Why is it the case that at the optimal bundle Ernie is using Verizon (the more expensive service)? Why would he not spend all his money on AT&T (the less expensive service)?

Answers: 3

Show answers

Other questions on the subject: Mathematics

Mathematics, 21.06.2019 15:30, adriana145

Jonah runs 3/5 miles on sunday and 7/10 mile on monday. he uses the model to find that he can ran a total of 1 mile . what mistake does jonah make

Answers: 2

continue

Mathematics, 21.06.2019 17:30, Justinoreilly71

The dolphins at the webster are fed 1/2 of a bucket of fish each day the sea otters are fed 1/2 as much fish as the dolphins how many buckets of fish are the sea fed each day? simplify you answer and write it as a proper fraction or as a whole or mixed number

Answers: 1

continue

Mathematics, 22.06.2019 00:00, AnonymousLizard52303

The probability that a tutor will see 0, 1, 2, 3, or 4 students is given below determine the probability distribution's missing value.

Answers: 1

continue

Mathematics, 22.06.2019 00:30, sanfordl

1. according to the internal revenue service, the mean tax refund for the year 2007 was $2,708. assume the standard deviation is $650 and that the amounts refunded follow a normal probability distribution. a. what percent of the refunds are more than $3,000? b. what percent of the refunds are more than $3,000 but less than $4,000? c. what percent of the refunds are less than $2,000?

Answers: 2

continue

Do you know the correct answer?

Ernie has two cell phones and obtains positive utility from talking on both. His utility using AT&am...