Consider a consumer who faces the following utility function: U(x₁x₂) = 3x₁₂x where the consumer faces prices and income of Px₁ = 3; Px2 = 8; M=150. Using the equi-marginal principle, what are the utility maximizing quantities of both goods? O x₁ = 50; x2 = 37.5 O x₁ = 0.4; x2 = 2 O x₁ = 50; x2 = 20 O x₁ = 16.6; x2 = 12.5 O x₁ = 33.3; x2 = 6.67 O No answer

Consider a consumer who faces the following utility function: U(x₁x₂) = 3x₁₂x where the consumer faces prices and income of Px₁ = 3; Px2 = 8; M=150. Using the equi-marginal principle, what are the utility maximizing quantities of both goods? O x₁ = 50; x2 = 37.5 O x₁ = 0.4; x2 = 2 O x₁ = 50; x2 = 20 O x₁ = 16.6; x2 = 12.5 O x₁ = 33.3; x2 = 6.67 O No answer

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 10RQ: What is the rule relating the ratio of marginal utility to prices of two goods at the optimal...

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What is the rule relating the ratio of marginal utility to prices of two goods at the optimal choice? Explain why, if this rule does not hold, the choice cannot be utility-maximizing
Would you expect marginal utility to rise or fall with additional consumption of a good? Why?
When diminishing returns are present in consumption, the relationship between total utility and marginal utility is as follows: O Total utility increases at a decreasing rate while marginal utility decreases Total utility increases at an increasing rate while marginal utility increases Total utility increases at an increasing rate while marginal utility decreases Total utility decreases at a decreasing rate while marginal utility increases
Answer the question on the basis of the following total utility data for products L and M. Assume that the prices of L and M are $3 and $4, respectively, and that the consumer's income is $25 Units of L 1 2 3 4 5 Multiple Choice O Total Utility Units of M 9 O What level of total utility does the rational consumer realize in equilibrium? 51 utils 86 utils 162 utils 15 18 20 21 58 utils 1 2 3 4 5 Total Utility 16 28 36 40 42
Total utility O diminished as the quantity of a good increases increases as long as more goods are acquired increases as long as marginal utility increases O increases as long as marginal utility is positive diminishes as consumption of some good rises
A consumer is making purchases of products Alpha and Beta such that the marginal utility of product Alpha is 63 and the marginal utility of product Beta is 40. The price of product Alpha is $9, and the price of product Beta is $5. The utility-maximizing rule suggests that, to stay within a given budget constraint, this consumer should Multiple Choice O O O increase consumption of product Beta and increase consumption of product Alpha. make no change in the consumption of Alpha or Beta. increase consumption of product Beta and decrease consumption of product Alpha. increase consumption of product Alpha and decrease consumption of product Beta.
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