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1. Suppose someone's budget is $780, and it is fully spent on buying Product A. The
2.
Consider the spending choices of the following consumer:
Emily's income is spent on colas and orange sodas, as well as other goods. She considers colas to be a normal good and orange sodas to be a normal good.
What will happen to Emily's purchases of these goods if her income decreases? Select the best answer.
She will buy more colas and fewer orange sodas.
She will buy fewer colas and fewer orange sodas.
She will buy more colas and more orange sodas.
She will buy fewer colas and more orange sodas.
Is the following statement true or false? Select the best answer.
The price ratio of coffee to cookies is 1.5, so the
This statement is false.
This statement is true.
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- 3. Sam has set aside $480 for entertainment this month, which is golf (x) and/or bowling (z). A round of golf is $40 and a night of bowling is $30. His utility function is U = 3x + 2z. What is his MRS? a. b. c. Solve for the optimal choice of golf and bowling. Draw a graph of the budget line (including intercepts), a few indifference curves, and the optimal choice for Sam.arrow_forwardThe table below shows the total utility from consuming different amounts of Grapefruits. Use the information below to calculate the Marginal Utility for each quantity. Quantity Total Utility 0 0 2 8 10 48 % 116 132 138 Marginal Utility 9-arrow_forwardSuppose you have a budget of 30 to spend on two goods: pizzas and burgers. Each pizza is $5 while each burger is $10. Suppose you already purchased 6 pizzas. What is the maximum number of burgers that you can buy with the remaining funds in your budget?arrow_forward
- Q6) Utility Ratio and Consumption Maximization A consumer downloads 3 movies and 4 apps per week. Suppose the price is $2 per movie and $2 per app, and the marginal utility for this consumption level is 6 for a movie and 8 for an app. Instructions: Round your responses to one decimal place. a. Calculate, show the formula, marginal utility per dollar. ..Per movie ......Per app b. Is this optimal consumption? c. If not, how should they change their consumption to maximize?arrow_forward10- Quantity of D 8 6 2 0 2 6 8 10 4 Quantity of C Refer to the budget line shown in the diagram. Which of the following combinations of goods is unattainable for this consumer? 2 units of C and 6 units of D 1 unit of C and 8 units of D 4 units of C and 6 units of D 5 units of C and no units of Darrow_forwardIf the price of food is $20, the price of clothing is $80, and annual income is $60,000, determine the number of units of food and clothing the consumer purchases and the amount of utility the consumer derives from the optimal combination.arrow_forward
- Draw YOUR indifference curve for the consumption of two goods (you pick the goods – be creative!) Make sure to include labels. Why did you choose these two goods? Why do you view these as being a tradeoff? Carefully explain why the indifference curve has the shape you created. (Hint: Discuss the slope. What it means and how it changes) Determine a budget that will be allocated towards your consumption of these two goods. Given the budget, prices for the goods, and your preferences, how will you find the utility-maximizing combination? Give an intuitive answer as well as a graphical answer (make sure to label the graph accordingly).arrow_forwardIf at a quantity consumed of 1 unit, total utility equals 25 and marginal utility equals 25, and at a quantity consumed of 2 units, total utility is unknown and marginal utility is 20, and at a quantity consumed of 3 units, total utility is 57 and marginal utility is unknown, what is marginal utility of the third unit?arrow_forwardThe principle of diminishing marginal utility says that people don't enjoy consuming more of a good. True or False and Explain the choicearrow_forward
- 4. Liam initially has a weekly allowance of €24 to spend on eggs (at €0.40 per egg) and beans (at €0.80 per tin). Liam will only consume 4 eggs with each tin of beans and never changes this proportion. (a) What is the utility maximising amount of eggs and beans that Liam buys each week? (b) Suppose the price of eggs rise to €0.60 per egg but the price of beans falls to €0.60 per tin. At the same time, Liam's weekly allowance rises to €30. How much of each good will Liam now buy? Compare your answer to that in (a) and explain the difference, if there is one. Use a diagram to complement your answer.arrow_forward5. 7. 5. Bob budgets $24 a week for entertainment. He splits his time between going to the movies and going to the gym. Based upon the information contained below, find Bob's utility maximizing point. First: Complete the budget constraint. (Determine what combinations are possible.) Income: $24 Movie Price: $6 Gym Session Price: $3 Movies Gym Sessions Second: Complete this chart and use it to determine the utility maximizing point. Total MU MU per $ Gym Total MU Visits Utility Movies MU Utility per $ 0. 30 1 2, 50 5 85 76 115 4 92 4 107 111 114 5. 103 91 115 6. Thinking laterally: Forlunch. Maria eats onlv salads or vegetarian burgers, Her weekly fond bud sh (United States) 234 5arrow_forward6arrow_forward
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