O A. the substitution effect of a price change is larger than the income effect, but a network externality is negative if the income effect is larger than the substitution effect. O B. consumption by others decreases a typical consumer's marginal utility from consuming the good, but a network externalit is negative if consumption by others increases a typical consumer's marginal utility from the good. O C. the price is lower the more paople own it, but a network externality is negative if the price is lower the fower people own it. O D. the quantity demanded is higher the more people own it, but a network externality is negative if the quantity demanded is lower the more people own it. E. it has a complement, but a network effect is negative if it has a substitute. ve an example of each. n example of a positive network externality is the demand for A. a work of art for exclusivity, and an example of a negative network externality is the demand for a work of art for status. O B. a toy to indulge a fad, and an example of a negative network externality is the demand for computers whose intrinsic value

O A. the substitution effect of a price change is larger than the income effect, but a network externality is negative if the income effect is larger than the substitution effect. O B. consumption by others decreases a typical consumer's marginal utility from consuming the good, but a network externalit is negative if consumption by others increases a typical consumer's marginal utility from the good. O C. the price is lower the more paople own it, but a network externality is negative if the price is lower the fower people own it. O D. the quantity demanded is higher the more people own it, but a network externality is negative if the quantity demanded is lower the more people own it. E. it has a complement, but a network effect is negative if it has a substitute. ve an example of each. n example of a positive network externality is the demand for A. a work of art for exclusivity, and an example of a negative network externality is the demand for a work of art for status. O B. a toy to indulge a fad, and an example of a negative network externality is the demand for computers whose intrinsic value

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.15P

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Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a roundâ€”trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.
Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
Praxilla, who lived in ancient Greece, derives utility from reading poems and from eating cucumbers. Praxilla gets 30 units of marginal utility from her first poem 27 units of marginal utility from her second poem 24 units of marginal utility from her third poem, and so on, with marginal utility declining by three units for each additional poem. Praxilla gets six units of marginal utility for each of her next three cucumbers consumed, five units of marginal utility for each of her next three cucumbers consumed, four units of marginal utility for each of the following three cucumbers consumed, and so on, with marginal utility declining by one for every three cucumber consumed. A poem costs three bronze coins hut a cucumber costs only one bronze coin. Praxilla has 18 bronze coins. Sketch Praxillas budget set between poems and cucumbers, placing poems on the vertical axis and cucumbers on the horizontal axis. Start off with the choice of zero poems and 18 cucumbers, and calculate the changes in marginal utility of moving along the budget line to the next choice of one poem and 15 cucumbers. Using this step-by-step process based on marginal utility, create a table and identify Praxillas utilityâ€”maximizing choice. Compare the marginal utility of the two goods and the relative prices at the optimal choice to see if the expected relationship holds. Hint: Label the table columns: 1) Choice, 2} Marginal Gain from More Poems, 3) Marginal Loss from Fewer Cucumbers, 4) Overall Gain or Loss, 5) Is the previous choice Optimal? Label the table rows: 1) 0 Poems and 18 Cucumbers, 2) 1 Poem and 15 cucumbers, 3) 2 Poems and 12 cucumbers, 4) 3 Poems and 9 Cucumbers, 5) 4 Poems and 6 cucumbers 6) 5 Poems and 3 Cucumbers, 7) 6 Poems and 0 Cucumbers.
Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
Who determines how much utility an individual will receive from consuming a good?