Stanley consumes only white and red wines and his utility function can be descri

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.

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