ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question 4
price of lemonade falls, it is as
LO7.4
a. Increases.
b. Decreases.
C. Stays the same
. Suppose that Omar's marginal utility for cups of coffee is con-
the other hand, his marginal utility per doughnut is 10 for the first
doughnut he eats, 9 for the second he eats, 8 for the third he eats,
and so on (that is, declining by 1 util per additional doughnut). In
addition, suppose that coffee costs $1 per cup, doughnuts cost $1
each, and Omar has a budget that he can spend only on dough-
nuts, coffee, or both. How big would that budget have to be before
he would spend a dollar buying a first cup of coffee? LO7.2
4. Columns 1 through 4 in the following table show the marginal
utility, measured in utils, that Ricardo would get by purchasing
various amounts of products A, B, C, and D. Column 5 shows
the marginal utility Ricardo gets from saving. Assume that the
prices of A, B, C, and D are, respectively, $18, $6, $4, and $24
and that Ricardo has an income of $106. L07.2
a. What quantities of A, B, C, and D will Ricardo purchase in
maximizing his utility?
b. How many dollars will Ricardo choose to save?
c. Check your answers by substituting them into the algebraic
statement of the utility-maximizing rule.
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Transcribed Image Text:price of lemonade falls, it is as LO7.4 a. Increases. b. Decreases. C. Stays the same . Suppose that Omar's marginal utility for cups of coffee is con- the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the third he eats, and so on (that is, declining by 1 util per additional doughnut). In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on dough- nuts, coffee, or both. How big would that budget have to be before he would spend a dollar buying a first cup of coffee? LO7.2 4. Columns 1 through 4 in the following table show the marginal utility, measured in utils, that Ricardo would get by purchasing various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the prices of A, B, C, and D are, respectively, $18, $6, $4, and $24 and that Ricardo has an income of $106. L07.2 a. What quantities of A, B, C, and D will Ricardo purchase in maximizing his utility? b. How many dollars will Ricardo choose to save? c. Check your answers by substituting them into the algebraic statement of the utility-maximizing rule.
KIOVCHAPTER 7 Utility
COUUGCE
Column 1
Column 2
Column 3
Column 4
Column 5
Units
Units
Units
Units
Number of
of A
MU
of B
MU
of C
MU
of D
MU
Dollars Saved
MU
1
72
1
24
1
15
1
36
1
2
54
2
15
12
30
4
45
12
8
3
24
3.
3.
4
36
4
9
4
7
4
18
4
27
7 5 sO
13
6
18
4
6.
7
7
7
4
8.
12
8.
1 bs 82 21 3
8.
8.
sing between two goods, X and Y, and your mar-
om each is as shown in the following table. If your
nd the prices of X and Y are $2 and $1, respec-
6. ADVANCED ANALYSIS Let MU, = z =
z = 21 - 2y, where z is marginal utility pe
utils, x is the amount spent on product A,
expand button
Transcribed Image Text:KIOVCHAPTER 7 Utility COUUGCE Column 1 Column 2 Column 3 Column 4 Column 5 Units Units Units Units Number of of A MU of B MU of C MU of D MU Dollars Saved MU 1 72 1 24 1 15 1 36 1 2 54 2 15 12 30 4 45 12 8 3 24 3. 3. 4 36 4 9 4 7 4 18 4 27 7 5 sO 13 6 18 4 6. 7 7 7 4 8. 12 8. 1 bs 82 21 3 8. 8. sing between two goods, X and Y, and your mar- om each is as shown in the following table. If your nd the prices of X and Y are $2 and $1, respec- 6. ADVANCED ANALYSIS Let MU, = z = z = 21 - 2y, where z is marginal utility pe utils, x is the amount spent on product A,
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