. Utility maximization, math, corner solutions. (12 points) Suppose Greg likes bagels and donuts....

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. Utility maximization, math, corner solutions. (12 points) Suppose Greg likes bagels and donuts. Greg has a quasi-linear utility function over bagels and donuts given by U(B, D) = ln B + D, where B and D are the numbers of bagels and donuts he eats every month. Quasilinear utility functions are special forms of utility where utility is linear in one variable. (a) (4 points) Draw an indifference map for this utility function with bagels on the horizontal axis, for U=2, U=3, and U=4. (b) (8 points) Suppose Greg has $50 to spend on bagels and donuts a week, the price of a bagel is $2, the price of a donut is pD. Is it possible for Greg to choose to spend all his money on bagels and none on donuts? If yes, for what values of pD will this occur? If not, explain why not. In both instances, use a graph with an indifference curve and budget constraint to illustrate.

David · Accepted Answer

Utility maximization, math, corner solutions. (12 points) Suppose Greg likes bagels and donuts. 
Greg has a quasi-linear utility function over bagels and donuts given by U(B, D) = ln B + D, 
where B and D are the numbers of bagels and donuts he eats every month. Quasilinear utility 
functions are special forms of utility where utility is linear in one variable.

. Utility maximization, math, corner solutions. (12 points) Suppose Greg likes bagels and donuts. Greg has a quasi-linear utility function over bagels and donuts given by U(B, D) = ln B + D, where B...

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