Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 7, Problem 2DQ
To determine
Utility maximizing combination.
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Students have asked these similar questions
The figure to the right represents the demand for ice cream cones.
Which of the following statements is true?
O A. Points a and b may not necessarily be the utility - maximizing
quantities of ice cream cones at two different prices because we
have no information on the consumer's budget or the price of other
goods.
B.
Points a and b are the utility - maximizing quantities of ice cream
cones at two different prices of ice cream.
O C. Points a and b are derived independently of the utility - maximizing
model.
O D.
Point a could be a utility - maximizing choice if the price is $3 but
point b may not be because we have no information on the
marginal utility per dollar when price changes.
Price
$3
1
3
4
Demand
Quantity
Units of rice
1
2
3
4
5
6
7
8
O 50 utils
O 53 utils
O 28 utils
Marginal Utility of rice
O 25 utils
20
18
16
14
12
10
9
8
Units of raisins
1
2
3
4
5
6
7
If the consumer buys 2 units of rice and 2 units of raisins, the consumer's total utility will be
O 4 utils
8
Marginal Utility of raisins
8
7
6
5
4
3
2
1
Mrs. Simpson buys loaves of bread and quarts of milk each week at prices of $1 and 80 cents, respectively. At present she is buying these products in amounts such that the marginal utilities from the last units purchased of the two products are 80 and 70 utils, respectively. Is she buying the utility-maximizing combination of bread and milk? If not, how should she reallocate her expenditures between the two goods?
Chapter 7 Solutions
Economics (Irwin Economics)
Ch. 7.1 - Prob. 1QQCh. 7.1 - Prob. 2QQCh. 7.1 - Prob. 3QQCh. 7.1 - Prob. 4QQCh. 7.A - Prob. 1ADQCh. 7.A - Prob. 2ADQCh. 7.A - Prob. 3ADQCh. 7.A - Prob. 1ARQCh. 7.A - Prob. 2ARQCh. 7.A - Prob. 1AP
Ch. 7.A - Prob. 2APCh. 7.A - Prob. 3APCh. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQCh. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7P
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- Answer the question on the basis of the following total utility data for products L and M. Assume that the prices of L and M are $3 and $4, respectively, and that the consumer's income is $25 Units of L 1 2 3 4 5 Multiple Choice O Total Utility Units of M 9 O What level of total utility does the rational consumer realize in equilibrium? 51 utils 86 utils 162 utils 15 18 20 21 58 utils 1 2 3 4 5 Total Utility 16 28 36 40 42arrow_forwardThe table shows the marginal utility schedules for product X and product Y for a hypothetical consumer. The price of product X is $6 and the price of product Y is $2. The income of the consumer is $30. MU x MUy Units of X Units of Y 72 1 24 66 20 3 60 3 16 4 48 4 12 30 When the consumer purchases the utility-maximizing combination of product X and product Y, total utility will be. O76 O 356 96 156 306 86 2. 2.arrow_forward. Suppose that initially, bread is $2 per loaf,and cake is $2 per slice. Marie Antoinettehas $18 to spend on these items each week.At this income and those prices, Marie consumes 5 loaves of bread and 4 slices of cake.Then, the price of bread DECREASES to$1 per loaf. (The price of cake is still $2.)IF Marie’s budget had also fallen to $13so that she could still just afford her original bundle, she WOULD choose to spendthose $13 on 7 loaves of bread and 3 slicesof cake.But since Marie still has her original $18budget, she actually chooses to buy 4loaves of bread and 7 slices of cake afterthe price change.When the price of bread fell from $2 to $1,what was the substitution effect on Marie’sdemand for bread?arrow_forward
- Fill in the marginal utility schedule for each of the goods. Assume that the price of food is $20, clothing $10, and housing $30. What is marginal utility per $ derived from consumption of the first unit of each of t1 three commodities? If Smith had only $20 to spend, which good(s) would he Assume that Smith's income is $130/week. If he purchased only the three commodities and faced the price structure in part b, how many units of each . would he demand per week?arrow_forwardJill likes to consume coffee and cream in a very particular way: with every cup ofcoffee she always consumes two 0.5 oz. cream containers. Jill is a utility maximizer anddecides to spend her income is $120 per month on coffee and cream. If the price of eachcoffee cup is $2.50, and the price of each cream container is $0.25, she will consume______ cups of coffee and ______ cream containers per month.A) 48; 96.B) 96; 48.C) 240; 480D) 80; 40E) None of the above.arrow_forwardFor normal goodsA) the substitution effect of a price decrease will decrease the quantity of the good demanded while theincome effect of a price decrease will increase the quantity of the good demanded.B) the substitution and income effects of a price decrease will both increase the quantity of the gooddemanded.C) the substitution and income effects of a price decrease will both decrease the quantity of the gooddemanded.D) the substitution effect of a price decrease will increase the quantity of the good demanded while theincome effect of a price decrease will decrease the quantity of the good demanded.arrow_forward
- Morty's marginal utility from consuming orange juice is 80 utils per ounce and his marginal utility from consuming coffee is 50 utils per ounce. If orange juice costs $0.25 per curice and coffee costs $0.20 per ounce, is Morty maximizing his total utility from the two beverages? At his current level of consumption, Morty receives on coffee. Thus, is Morty maximizing his total utility? utils per dollar spent on orange juice, and he receives (Key in Yes or No) utils per dollar spentarrow_forwardIn two commodities world, utility function for a consumer and her income are given respectively. 11 U = x2y2 I= 480 If the price of these goods are Px= 15 and P, = 60 what would be her demand for these two goods * =? and y =? If the price of first good P has increased from 15 to 60. To keep her utility fixed how much does she need to spend for these two goods at least. In other words what should be her minimum income.arrow_forwardSuppose that with a budget of $100, Deborah spends $60 on sushi and $40 on bagels when sushi costs $2 per piece and bagels cost $2 per bagel. But then, after the price of bagels falls to $1 per bagel, she spends $50 on sushi and $50 on bagels. How many pieces of sushi and how many bagels did Deborah consume before the price change? At the new prices, how much money would it have cost Deborah to buy those same quantities (the ones that she consumed before the price change)? Given that it used to take Deborah’s entire $100 to buy those quantities, how big is the income effect caused by the reduction in the price of bagels?arrow_forward
- The table below shows total utility for two products. Suppose that the price for product A is $5 and the price for product B is $5. Number of product A Total Utility for A Number of product B Total Utility for B 0 0 0 0 1 140 1 180 2 260 2 340 3 360 3 460 4 440 4 520 5 500 5 540 Given this data, complete the table below: Quantity of A Marginal Utility for A Marginal Utility for A per dollar Quantity of B Marginal Utility for B Marginal Utility for B per dollar 0 0 1 1 2 2 3 3 4 4 5 5arrow_forwardLouis is trying to decide what combination of cups and plates to buy. His budget is $12. Plates cost $4 each and cups cost $2 each. The numbers in the table represent total utility. Given his budget, which combination will maximize total utility? number of plates and cups. Quantity Plates Utility from Plates 1 33 2 3 4 LO 5 6 64 93 103 112 123 Quantity Cups Utility from Cups 1 15 2 3 4 5 6 27 42 54 65 75arrow_forwardMorty's marginal utility from consuming orange juice is 80 utils per ounce and his marginal utility from consuming coffee is 50 utils per ounce. If orange juice costs $0.20 per and coffee costs $0.20 per ounce, is Morty maximizing his total utility from the two beverages? At his current level of consumption, Morty receives utils per dollar spent on orange juice, and he receives a utils per dollar spent on coffee. Thus, is Morty maximizing his total utility? (Key in Yes or No) .arrow_forward
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