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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Chapter 7.A, Problem 1ARQ
To determine
The indifference curve and total utility.
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Riley has $6 to spend on ramen and apps for their phone. The price of a bowl of ramen is
$2, and the price of an app is $1. Riley's preferences for ramen and apps are represented
by the indifference curves on the next page.
a. Determine which line (L1, L2, L3, L4, or L5) represents Riley's budget
constraint.
b. Find the utility-maximizing bundle for Riley (E1, E2, E3, E4, or E5). Determine
how many bowls of ramen Riley will buy.
Suppose now that the price of a bowl of ramen is discounted for students to $1 per bowl.
c. Determine which line (L1, L2, L3, L4, or L5) represents Riley's new budget
constraint.
d. Find the new utility-maximizing bundle for Riley (E1, E2, E3, E4, or E5).
Determine how many bowls of Ramen Riley will now buy.
e. Find the size and direction (positive or negative) of the substitution effect. As
part of your answer, state the starting quantity and ending quantity of bowls of
ramen that represent this effect.
f. Find the size and direction (positive or negative) of…
John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke or does he show increasing marginal utility for Coke? Suppose that John has $3 in his pocket. If Cokes cost $1 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too? What about the third dollar? If John’s marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke?
*use tables and/or graphs if possible, please original work
Mike is a jellyfish wrangler. In June and July he spent his budget on fish tanks and wet suits. Each fish tank cost $50 and each wet suit cost $100. At Mike's optimal choice, his marginal utility from the last fish tank purchased is 200. This means that his marginal utility from the last wet suit purchased is:
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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Similar questions
- Your classmate tells you that he is indifferent between three soft drinks and two hamburgers or two soft drinks and three hamburgers - Draw a rough diagram of an indifference curve containing your classmate’s consumption choices. - Suppose that your classmate also states that he is indifferent two soft drinks and three hamburgers or one soft drink and four hamburgers, but that he prefers three soft drinks and two hamburgers to one soft drink and four hamburgers. Use your diagram from part (a) to reason out whether he can have these preferences.arrow_forwardJohn likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke, or does he show increasing marginal utility for Coke? Supposethat John has $3 in his pocket. If Cokes cost $1 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too? What about the third dollar? If John’s marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke?arrow_forwardConsider two bundles of coffee and chocolate and how Ted feels about them. The first bundle consists of two cups of coffee and two chocolate bars. The second bundle consists of one cup of coffee and three chocolate bars. If the first bundle gives Ted a total utility of 18 utils while the second bundle gives Ted a total utility of 19 bundles, could the two bundles be on the same indifference curve? Answer yes or no.arrow_forward
- Mylie’s total utility from singing the same song over and over is 50 utils after one repetition, 90 utils after two repetitions, 70 utils after three repetitions, 20 utils after four repetitions, −50 utils after five repetitions, and −200 utils after six repetitions. Write down her marginal utility for each repetition. Once Mylie’s total utility begins to decrease, does each additional singing of the song hurt more than the previous one or less than the previous one?arrow_forwardPaolo enjoys consuming both soda and coffee. Each can of soda costs Ps = $1, and each cup of coffee costs Pc = $2. Suppose that Paolo buys 75 cans of soda and 50 cups of coffee per month. The following graphs show his marginal utility curves for soda and coffee. At his current consumption level, Paolo's marginal utility from consuming the last can of soda he bought is MUS = 12 utils per can, and his marginal utility from consuming the last cup of coffee he bought is MUC = 12 utils per cup. 24 20 20 16 25 50 75 100 125 150 25 50 75 100 125 150 SODA (Cans) COFFEE (Cups) Is Paolo currently maximizing his utility? O No; he likes coffee and soda more than other goods, so he should buy more of both. O No; he could buy less soda and more coffee, not spend any more money, and be better off. O Yes; the marginal utility he receives from his last can of soda equals that of his last cup of coffee. O No; he could buy more soda and less coffee, not spend any more money, and be better off. MU OF SODA…arrow_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
- Suppose that you are given $60,000 to split between two people, Jane and Fred. The income and marginal utility for each of them is shown in the following table. Amount to Jane $5,000 $ 7,000 $ 9,000 $ 11,000 $ 13,000 Amount to Fred $ 55,000 $ 53,000 $ 51,000 $ 49,000 $ 47,000 MU of Jane's Last Dollar Spent $95 $ 90 $85 $80 $75 Amount to Fred = $ MU of Fred's Last Dollar Spent $ 85 $ 90 $95 $ 100 $ 105 T Instructions: Enter your answers as a whole number. If you want to maximize their combined utility, how much of the $60,000 should go to Jane? How much should go to Fred? Amount to Jane = $ Aarrow_forward2. Eren's two main hobbies are taking vacations overseas (V) and eating expensive meals (M). His utility function is given as: U(V,M) = V²M Last year, the average price of taking a vacation overseas was US$200 and the average price of an expensive meal is $50. However, due to supply problems in Onions, the average price of an expensive meal rose to $75. The average price of a vacation did not change. His income, which is $1500, did not change. a. b. C. Calculate the change in consumer surplus from consuming the expensive meals considering the price change (Hint: you need to compare his optimal consumption bundle before and after the price change to get the change in CS). Suppose that the Department of Welfare wants to know how much should be given to Eren to offset his change un utility due to the price increase of an expensive meal. Calculate the compensative variation (CV). Calculate for the equivalent variation (EV) for the price change.arrow_forwardKrissy spends all her income on holiday lights (L) and fishing bait (B). Lights are priced at $2, while a pack of bait costs $1. Assume that Krissy has $30 to spend and her utility function can be represented as: U(L,B) = L²B² with: MU=2LB² and MU=2L²B (Assume B is on the y-axis when graphing). How much utility does Krissy obtain from the optimal bundle? Note: enter number(s) only and convert any fraction to a decimal.arrow_forward
- Donna and Jim are two consumers purchasing strawberries and chocolate. Jim’s utility function is ?(?,?) = ?? and Donna’s utility function is ?(?,?) = ?2? where x is strawberries and y is chocolate. Jim’s marginal utility functions are MUx=y and MUy=x while Donna’s are MUx=2xy and MUy=x2. Jim’s income is $100, andDonna’s income is $150. What is the optimal bundle for Donna if the price of strawberries is $2 and the price of chocolate is $4?arrow_forwardQuestion 6 A consumer spends all of her income on two goods, coffee and doughnuts. She buys coffee at 25 cents per unit with a total utility of 800 and a marginal utility of 12. Doughnuts are purchased at 75 cents a unit with a total utility of 200 and a marginal utility of 24. To increase her total utility, the consumer should: Buy more coffee and less doughnuts Buy more of both goods Do nothing. She is currently maximizing utility with her limited budget. Buy less of both goods Buy more doughnuts and less coffee.arrow_forward13. Shawn likes to consume pineapple smoothies and hotdogs. His preferences are represented by the utility function U(x,y) = 34x - x²/2 + y where x is his consumption of pineapple smoothies and y is his consumption of hotdogs. The price of pineapple smoothies is $2 and the price of hotdogs is $1. If the price of pineapple smoothies increases to $6, the change in Shawn's consumer surplus is: A) -144 B) -128 C) -120 D) -112 E) -90arrow_forward
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