7.2 In Problem 7.3, Pierre's friend Henri lives in a town where he has to pay 3 francs per glass of wine and 6 francs per loaf of bread. Henri consumes 6 glasses of wine and 4 loaves of bread per day. Recall that Bob has an income of $15 per day and pays $.50 per loaf of bread and $2 per glass of wine. If Bob has the same tastes as Henri and if the only thing that either of them cares about is consumption of bread and wine, we can deduce (a) nothing about whether one is better than the other. (b) Henri is better off than Bob.81 ai woh of viðsion TT
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- Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a round—trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.The table shows the marginal benefit that Marcus derives by consuming different quantities of hotdog and soda. The price of a hotdog is $3, and the price of a soda is $1. Soda Marginal Benefits ($) Marginal Benefits ($) 10 ITT 8 6 4 2 1 0.6 What is the optimal combination of Soda and Hotdog for Marcus, if his weekly budget for hotdog and soda is $14? Quantity 2 3 4 5 6 O A. 2 sodas, and 4 hotdogs O B. 3 sodas, and 3 hotdogs O C. 5 sodas, and 3 hotdogs O D. 6 sodas, and 5 hotdogs Hotdog 18 12 6 3 111:55 The table below shows the per unit prices and marginal utility for the last unit of waffles and donuts that Luke purchased. Waffles Price per unit Marginal utility Luke spent all of his allocated budget on waffles and donuts. To maximize his utility, Luke should purchase O fewer of both goods O fewer waffles and more donuts O equal amounts of both goods O more both goods O more waffles and fewer donuts $25 Donuts 50 $10 50
- 6.5 (0) Shirley Sixpack, as you will recall, thinks that two 8-ounce ca of beer are exactly as good as one 16-ounce can of beer. Suppose th these are the only sizes of beer available to her and that she has $30 spend on beer. Suppose that an 8-ounce beer costs $.75 and a 16-our beer costs $1. On the graph below, draw Shirley's budget line in blue in and draw some of her indifference curves in red. 8-ounce cans 40 30 20 10 10 20 30 40 16-ounce cans (a) At these prices, which size can will she buy, or will she buy some of each? (b) Suppose that the price of 16-ounce beers remains $1 and the price of 8-ounce beers falls to 8.55. Will she buy more 8-ounce beers?- (c) What if the price of 8-ounce beers falls to $.40? How many 8-ounce beers will she buy then?. (d) If the price of 16-ounce beers is s1 each and if Shirley chooses some 8-ounce beers and some 16-ounce beers, what must be the price of 8-ounce beers?. (e) Now let us try to describe Shirley's demand function for 16-ounce beers as a…The following table shows Ellie's utility from consuming slices of pie and cans of 7 - Up. Slices of Pie 0 1 23456 Marginal Utility Cans from Last Slice of 7-Up 0 1 2 120 100 80 60 40 20 234 5 6 Marginal Utility from Last Can 120 60 45 30 20 15 Suppose Ellie has $6 per week to spend on pie and 7 - Up and that the price of a slice of pie is $1.00. 1.) Use the point drawing tool to plot Ellie's demand for 7-Up at a price of $2.00. Label this point 'A'. 2.) Use the point drawing tool to plot Ellie's demand for 7- Up at a price of $0.50. Label this point 'B'. 3.) Use the line drawing tool to connect the dots to form Ellie's demand curve. Properly label this line. Carefully follow the instructions above, and only draw the required objects. Price of 7-Up 12 4.5- 4- 3.5- 3- 2.5- 2- 1.5- 1- 0.5- 0- 3 4 Quantity of 7-Up 5You like to eat apples and carrots. The graph shows your budget for both of these items at Harris Teeter. The table shows your total utility when you consume apples or carrots. Given this, what is your optimal consumption point? Carrots 30 40 50 30- 23 O a. A O b. E O c. F O d. C 15 10 5 A B Apples (Quantity) Total Utility Carrots (Quantity) Total Utility 10 100 20 10 20 30 40 50 Apples 190 C 270 330 360 5 10 15 20 23 25 30 50 95 160 205 240 250 280
- Explain the difference between a positive and a negative network externality. A network externality for a good is positive if O A. the substitution effect of a price change is larger than the income effect, but a network externality is negative if the income effect is larger than the substitution effect. B. consumption by others decreases a typical consumer's marginal utility from consuming the good, but a network extemality is negative if consumption by others increases a typical consumer's marginal utility from the good. c. the price is lower the more people own it, but a network externality is negative if the price is lower the fewer people own it. D. the quantity demanded is higher the more people own it, but a network externality is negative if the quantity demanded is lower the more people own it. O E. it has a complement, but a network effect is negative if it has a substitute. Give an example of each. An example of a positive network externality is the dermand for A. a work of…5.2 David gets $3 per week as an allowance to spend any way he pleases. Because he likes only peanut butter and jelly sand- wiches, he spends the entire amount on peanut butter (at $0.05 per ounce) and jelly (at $0.10 per ounce). Bread is pro- vided free of charge by a concerned neighbor. David is a par- ticular eater and makes his sandwiches with exactly 1 ounce of jelly and 2 ounces of peanut butter. He is set in his ways and will never change these proportions. a. How much peanut butter and jelly will David buy with his $3 allowance in a week? b. Suppose the price of jelly were to increase to $0.15 an ounce. How much of each commodity would be bought? c. By how much should David's allowance be increased to compensate for the increase in the price of jelly in part (b)? d. Graph your results in parts (a) to (c). e. In what sense does this problem involve only a single commodity, peanut butter and jelly sandwiches? Graph the demand curve for this single commodity. f. Discuss the…Units of rice 1 2 3 4 5 6 7 8 O 50 utils O 53 utils O 28 utils Marginal Utility of rice O 25 utils 20 18 16 14 12 10 9 8 Units of raisins 1 2 3 4 5 6 7 If the consumer buys 2 units of rice and 2 units of raisins, the consumer's total utility will be O 4 utils 8 Marginal Utility of raisins 8 7 6 5 4 3 2 1
- Five consumers have the following marginal utility ofapples and pears:Marginal Utilityof ApplesMarginal Utilityof PearsClaire 6 12Phil 6 6Haley 6 3Alex 3 6Luke 3 12The price of an apple is $1, and the price of a pear is$2. Which, if any, of these consumers are optimizingtheir choices of fruit? For those who are not, howshould they change their spending?Table 6.2 Units Consumed Total Utility 1 30 65 85 4 89 88 Refer to Table 6.2, which shows the total utility derived from the consumption of a good. The first column of the table shows the number of units of the good consumed in a day, and the second column of the table shows the total utility derived from that consumption. What is the marginal utility of consuming the third unit? Oa 65 O b. 20 OC. 35 Od. 0 O e. 30John 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?