Waldo\'s utility function is U(x,y) = xy. Waldo consumes 5 units of x and 25 uni

Question

Waldo's utility function is U(x,y) = xy. Waldo consumes 5 units of x and 25 units of y. (Show your work please) a. Waldo would be willing to make small exchanges of x for y in which he would give up 5 units of x for every unit of y he got. b. Waldo would be willing to trade away all of his x for y as long as he got more than 5 units of y for every unit of x he gave up. c. Waldo likes x and y equally well so he is always willing to exchange 1 unit of either good for more than 1 unit of the other. d. Waldo will always be willing to make trades at ay 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 1 unit of the other.

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