Suppose in an economy there are two people, Chris and Phill and two goods Avocado and apple. Phill likes to consume more avocado and Chris likes to consume more apple but they must consume both. How government can allocate these resources efficiently between them and optimize their utility? Support your answer with graphs.
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- 1. Hatfield and McCoy hate each other. The only good they both consume WH W2 40 Mand McCoy's is whiskey. Hatfield's utility function is UH utility function is UM = WM-W, where WHI is Hatfield's consumption 40' Η of whisky and WM is McCoy's consumption of whiskey. The sheriff has confiscated a total of 60 litres of whiskey which he could give back to them or throw in the creek. Say that the Sheriff wants them both to be as well off as possible and weighs their "happiness" equally. How much whiskey should the sheriff give to each of them? Should he throw any whiskey in the creek; if so how much? =The table shows the Gabrielle's total staty from manicures What is Cat's total unity when she boys 4 manicures? What is the marginal unity she receives from her fourth manicure? When Gabriele buys 4 manicures, the totalutty that she receives units Gabrieles marginal uity from the fourth manicure is units Marginality OA increases a more of a good is consumed OB has no relationship oluy Oc the chance in total usey that results from Manicures (per 0 1 2 4 5 Total uality 8 50 90 122 150 176Define veblen goods and give some example.
- Consider a simple economy with two individuals (A and B) and two goods (x and y). Can you please Write down the Pareto efficient conditions for this economy and explain thefirst fundamental theorem of welfare economics?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 government of Freeland is considering introducing a carbon tax to tackle global warming. They have asked for your help in analyzing the impact. They give you the following information. The average person in Freeland eans €30 a week. She spends it on a carbon good and on all other goods. Her preferences satisfy the usual assumptions of consumer choice theory. The carbon good currently costs €2 a unit and the average person buys 5 units of a carbon good per week. The government is considering putting a tax of €1 on carbon and giving a transfer of €5 to the average person to compensate her for the price increase. Will this proposal make the average consumer better off, worse off or the same as they were before the proposal? Explain clearly. Will this proposal lead to any change in the amount of the carbon good bought by the average consumer? Explain clearly.
- 5. Alaina has eaten two bowls of ice cream at La Michoacana. She considers eating an additional bowl of ice-cream. As a rational consumer, Alaina should make her choice by comparing the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs. O True FalseRaj consumes only cheese and crackers.a. Could cheese and crackers both be inferior goodsfor Raj? Explain.b. Suppose that cheese is a normal good for Rajwhile crackers are an inferior good. If the price ofcheese falls, what happens to Raj’s consumptionof crackers? What happens to his consumption ofcheese? ExplainThe following table presents information on Angel's marginal utility and price paid for the consumption of Pomegranates and Oranges, which are the only two goods that he consumes. Angel OYes ONO ONot enough information What should Angel do? Pomegranates Price $4 Based on the utility maximizing rule, Is Angel maximizing their utility? OPurchase more Pomegranates and less Oranges OPurchase less Pomegranates and more Oranges OMake no changes Marginal Utility MacBook Air 7 Oranges Price $12 Marginal Utility 31
- The following table shows Madison's utility from consuming popcom and Coke Suppose that Madison han income of $21.00, the price of popcom is 6.00 and the price of Coke in $4 50 FMadson wants to maiire her y how much popcom and Coke should she buy? ITT Popcorn Marginal Unity 192 144 Coke Marginal Uity 144 100 72 36 18 Quantity 48 24 12 Madison should buy boxes of popcom and cans of Coke Enter your reponses as negers)Macmillan Lear Neal is a coffee drinker. At the local coffee shop, the price of a cup of coffee is $3. Neal's total benefits from drinking coffee are indicated in the accompanying table. Use this information to calculate Neal's marginal benefit of consuming each cup of coffee. a. The marginal benefit of the first cup is $ c. The marginal benefit of the third cup is $ e. The marginal benefit of the fifth cup is $ Quantity of coffee (cups per day) 1 2 3 4 5 Total benefits $8 $14 $18 $20 $21 b. The marginal benefit of the second cup is $ d. The marginal benefit of the fourth cup is $ f. Neil should consume cups of coffee per day.If the preferences are concave will the consumer ever consume both ofthe goods together?
