A Parent Has Two Children Living in Cities with Different

Multiple Choice

A parent has two children living in cities with different costs of living.The cost of living in city B is 4 times the cost of living in city A.The child in city A has an income of $3,000 and the child in city B has an income of $12,000.The parent wants to give a total of $1,000 to her two children.Her utility function is U(C A, C B) = C A C B, where C A and C B are the consumptions of the children living in cities A and B respectively.She will choose to give

A) each child $500, even though this will buy less goods for the child in city B
B) the child in city B 4 times as much money as the child in city A.
C) the child in city A 4 times as much money as the child in city B.
D) the child in city B 2 times as much money as the child in city A.
E) the child in city A 2 times as much money as the child in city B.