Solution of utility maximization

Question-

Sam enjoys collecting old editions of microeconomic theory books. Unfortunately, he has no income from employment, but he does accept bags of trash to be buried in his yard for a fee. Suppose the price of each old edition microeconomic book is $2, and San charges $1 for each bag of trash. Sam's utility is given by: U = min (2B, 20-T), where B is the number of old edition books, and T is the number of bags of trash collected by Sam. Note: U is the minimum of 2B and 20 - T, and so this is not a differentiable function.

1. With T on the vertical axis and B on the Horizontal axis, graph Sam's indifference curve for U = 4

2. Determine the values of B and T that maximize Sam's utility.

Posted Date: 3/20/2014 7:27:16 PM | Location : United Kingdom(UK)

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