Stanley consumes only white and red wines and his utility function can be descri
ID: 1129542 • Letter: S
Question
Stanley consumes only white and red wines and his utility function can be described by U(R,W) = R^0.40 W^0.60, where R is the number of bottles of red wine and W is the number of bottles of white wine that he consumes per month. Suppose that his income is ______ and the price of a bottle of red wine $20 and the price of a bottle of white wine is $15. In this case, Stanley will purchase _____ bottles of red wine and _____ bottles of white wine per month. Next, suppose that the price of white wine goes down to _____ per bottle. After the price change, Stanley consumes 40 bottles of white wine.
A) 500; 10; 20; 12
B) 800; 16; 32; 12
C) 800; 32; 16; 12
D) 500; 20; 10; 7.5
E) None of the above
Explanation / Answer
The answer is Option (E) None of the above because any of the given combination is exactly fit for the above situation.