6 Rebecca consumes both iced tea and coffee. Iced tea is priced at $1.50 per bottle and coffee at $2.00per 16-ounce cup. Which of the following marginal utility pairs is consistent with Rebecca'sconsumer equilibrium at these prices?a. MU of iced tea = 1; MU of coffee - 1b. MU of iced tea -1; MU of coffee-2c. MU of iced tea -2; MU of coffee = 3d. MU of iced tea = 3; MU of coffee = 4e. MU of iced tea = 4; MU of coffee = 5

The objective of the question is to find the pair of marginal utilities for iced tea and coffee that…

Answered: 6 Rebecca consumes both iced tea and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that Priya has Cobb-Douglas utility and she spends 1/4 of her income (budget) on good 1, and the remaining 3/4 on good 2. Solve for the quantity of good 1 that, when consumed with 3 units of good 2, she is just as well of as when she consumes 9 units of good 1 and 8 units of good 2. Round your answer to 2 decimal places. Your Answer: Answer
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Suppose Jeff has a perfect substitute preferences for watching movies (M) and TV (T) shows. Jeff's MRSTM is such that he is always indifferent between watching one movie and five TV shows independent of the amount of goods consumed. Which of the following statements is true? If Jeff had a choice between 1 movie and 1 TV show before bed, he would choose to watch the movie. If Jeff has already watched 3 movies and no TV shows, then he would prefer to watch a TV show next. He is indifferent between watching 1 TV show or 1 movie before bed. Jeff would prefer watching 2 TV shows and no movies over watching 2 Movies and no TV shows.
6.
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I. A)MRS=1/3, B)MRS=1/4, C)MRS=4/3, D)MRS=12 II. A)Rhea should buy more bread, less milk, B)Rhea should buy more milk, less bread, C) Rhea maximizes her utility at bundle A, so she should not change her consumptions of either good, D) Rhea cannot afford bundle A, so she should buy less of both goods III. A)Rhea's MRS at bundle A is greater than the price ratio (Pb/Pm), B)Changing her bundle moves Rhea to a higher indifference curve, C)The slope of the indifference curve (where bundle A is found) is not equal to the slope of Rhea's budget constraint, D)All of the above statements explain your answer to part II.
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