In Problem 3, Suppose Albert, a Typical Citizen, Has the Utility

In Problem 3, suppose Albert, a typical citizen, has the utility function U(m, d, h) = m + 5d² - d² - 2h, where d is the number of hours per day that he spends driving around, h is the average number of hours per day spent driving around by other people in his home town, and m is the amount of money he has left to spend on other stuff besides gasoline and auto repairs. Gas and auto repairs cost $1 per hour of driving. If each citizen believes that their own driving will not affect the amount of driving done by others, they will all drive D₁ hours per day. If all citizens drive to maximize the utility of a typical citizen, they will all drive D₂ hours per day, where

A) D₁ = 5 and D₂ = 0.
B) D₁ = D₂ = 2.
C) D₁ = 2 and D₂ = 1.
D) D₁ = 4 and D₂ = 2.
E) D₁ = 2 and D₂ = 0.

Correct Answer:

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