Waldo\'s utility function is U(x; y) = xy. Waldo consumes 5 units of x and 25 un
ID: 1098907 • Letter: W
Question
Waldo's utility function is U(x; y) = xy. Waldo consumes 5 units of x and 25 units of y.
(please show work or explain. i already know the answer, just need to know how to get it)
(a) Waldo would be willing to make small exchanges of x for y in which he gives up 5 units of x for every
unit of y he gets.
(b) Waldo would be willing to trade away all of his x for y so long he gets more than 5 units of y for every
unit of x he gives up.
(c) Waldo likes x and y equally well so he is always willing to exchange 1 unit of either good for more than
one unit of the other.
(d) Waldo will always be willing to make trades at any price if he does not have equal amounts of the two
goods.
(e) None of the above
Explanation / Answer
(c) Waldo likes x and y equally well so he is always willing to exchange 1 unit of either good for more than
one unit of the other
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