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Charlie's Utility Function Is XAxB

Question 7

Multiple Choice

Charlie's utility function is xAxB.The price of apples used to be $1, the price of bananas used to be $2, and his income used to be $40.If the price of apples increased to $5 and the price of bananas stayed constant, the substitution effect on Charlie's apple consumption would reduce his consumption by


A) 4 apples.
B) 13 apples.
C) 8 apples.
D) 16 apples.
E) None of the above.

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