7. MRS and utility maximizationSuppose your classmate Felix loves to eat dessert-so much so that he allocates his entire weekly budget to apple crisp and pie. The price of one bowlof apple crisp is $1.75, and the price of a piece of coconut crème pie is $7.00. At his current level of consumption, Felix's marginal rate of substitution(MRS) of apple crisp for pie is 5. In other words, Felix is willing to sacrifice five bowls of apple crisp for one piece of pie per week.Does Felix's current consumption bundle maximize his utility? That is, does it make him as well off as possible? If not, how should he change it tomaximize his utility?Felix could increase his utility by buying more apple crisp and less pie per week.Felix could increase his utility by buying less apple crisp and more pie per week.Felix's current bundle maximizes his utility, and he should keep it unchanged.

Felix could increase his utility by buying less apple crisp and more pie per…

Answered: 7. MRS and utility maximization Suppose…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Miss Coco consumes cheese cake and curry puff. Her consumption yields the following total utility as shown in the given table. Miss Coco has RM52 to spend. Suppose that the prices of cheese cake and curry puff are RM8 and RM4, respectively. Quantity (units) Total Utility Cheese Cake Curry Puff 1 56 32 2 104 60 3 136 84 4 160 104 5 170 116 6 176 126 7 178 134 What is the total utility received by Miss Coco at equilibrium?
If 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?
Assume that the price of oranges is $2 and the price of starfruit is $1. You have $10 of income to spend on both goods, and you intend to spend the entire amount. Note that MU stands for marginal utility. Q of oranges MU from oranges Q of starfruit MU of starfruit 1 $20 1 $12 2 16 2 10 3 12 3 8 4 8 4 6 5 4 5 4 6 0 6 2 To maximize total utility, you would consume _____ oranges and _____ starfruit. Question 25…
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Rohan’s current marginal utility from consuming peanuts is 100 utils per ounce and his marginal utility from consuming cashews is 200 utils per ounce. If peanuts cost $0.10 per ounce and cashews cost $0.50 per ounce, is Rohan maximizing his total utility from the kinds of nuts? Enter your responses as whole numbers. At the current level of peanut consumption, Rohan receives: utils per dollar.At the current level of cashew consumption, Rohan receives: utils per dollar.Therefore, Rohan maximizing his total utility because MUp/Pp is MUc/Pc.
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:
b) Diana has $6.00 to spend. She has the option to buy two goods: sandwiches and peppermints. Sandwiches cost $3.00 each, and peppermints cost $1.00 per pack. The table below shows the utility Diana derives from consuming sandwiches or peppermints at various levels of consumption. In the table below, compute and complete the table below for the marginal utility per dollar for each level of consumption. i. Peppermints Marginal Utility/ $ (price per each) Sandwiches Marginal Utility Marginal utility/ $ (price per each) Marginal Utility Units purchased 1 9 15 9 3 4 4 n/a n/a 1 ii. Briefly explain how Diana should spend the first $3.00.
Sergei splits his consumption between baseball bats and cameras. The price of baseball bats rises. If Sergei responds to this price increase by reducing his purchases of cameras, does this imply that he has a stronger income effect or a stronger substitution effect? Explain. If Sergei responds to this price increase by purchasing fewer baseball bats but more cameras, does this imply that he has a stronger income effect or a stronger substitution effect? Explain.
am. 113.
Donald derives utility from only two goods, carrots (X) and donuts (Y). His utility function is as follows: U(X,Y) =X0.1 Y0.9 . Donald has an income (M) of $900 and the price of carrots (PX) and donuts (PY) are $45 and $90 respectively. How will the bundle change when the price of carrot increased by $25 and the price of donut and income remain constant? Select one: A. Donald will now consume 3 units of carrot and 2 units of donuts B. Donald will now consume 2 units of carrot and 6 units of donuts C. Donald will now consume 2 units of carrot and 3 units of donuts D. Donald will now consume 1 unit of carrot and 1 unit of donuts E. Donald will now consume 2 units of carrot and 2 units of donuts
Carlos is originally consuming his optimal consumption bundle of cell phones and gasoline when the price of gasoline falls. Assume that both gasoline and cell phones are normal goods. How will a decrease in the price of gasoline affect your consumption of cell phones and gasoline? Explain using the substitution and income effects.
Mr. Rational has $27 that he plans to spend purchasing 5 units of good X (priced at $3 per unit) and 6 units of good Y (priced at $2 per unit). The marginal utility of the fifth unit of X is 30, and the marginal utility of the sixth unit of Y is 18. If Mr. Rational is a utility maximizer, he should: buy less of X and more of Y. buy X and Y in the quantities indicated. buy more of X and less of Y. not buy anything. buy less of X and even lesser than that of Y.

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