Marbella Has 101 Residents

Marbella has 101 residents. All wear the same fancy clothes and each has the same utility function, u(m, b, B) = m + 14b - b² - , where m is the amount of macaroni (in kilograms) that he or she eats per day, b is the number of hours that he or she spends on the beach per day, and B is the total number of person-hours spent per day on the beach by other residents of Marbella. Each has an income of $10 per day and macaroni costs $1 per kilogram. The city council is considering a law that would limit the amount of time that any person can spend on the beach. How many hours per day should they allow in order to maximize the utility of a typical Marbellite?

A) 10
B) 7
C) 9
D) 6
E) They could not possibly be made better off by legislation that limits their freedom to choose.

Correct Answer:

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