Question

Question 6 (1 point) Lansing High School has $120,000 to spend on computers and other educational supplies and equipment The school's decision-makers have preferences that can be represented with a utility function U(X,C) = X?C, where "C" represents expenditure on computers and X represents expenditure on other things. A well-known, but unnamed, computer software company has announced it will give 50 cents to Lansing High School for every dollar it spends on computers. This "matching grant" is open-ended--there is no maximum amount that the software company will donate. What will be Lansing's expenditure on computers, counting not only its own spending but the matching amount? (In other words, how many dollars' worth of computers will Lansing High School purchase?) 01) $60,000 O2) $46,666 More than $60,000 04) $40,000

Answer 1

option 1) 60,000

let Price of computer = P

So, As Cobb Douglas Utility function

So, C = M/3P

C = 120,000/3*P

= 40,000/P

Total spending on computers = P*C

= 40,000

Total spending contributed by software company = 40,000*.5

=20,000

So total sum = 40,000 + 20,000

= 60,000