ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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KEY
behavioral economics, 467
bounded rationality, 467
MS
equilibrium, 467
consumer
diminishing marginal utility, 456
disutility, 457
equimarginal principle, 463
marginal utility, 457
neuroeconomics, 471
EXERCISES
1. Using the following information, calculate total utility
and marginal utility.
a. Plot the total utility curve.
b. Plot marginal utility directly below total utility.
c. At what marginal utility value does total utility reach
a maximum?
Number of utils for the first unit
Number of utils for the second unit
Number of utils for the third unit
Number of utils for the fourth unit
Number of utils for the fifth unit
Number of utils for the sixth unit
Number of utils for the seventh unit
Number of utils for the eighth unit
Number of utils for the ninth unit
300
250
220
160
100
50
20
0
-250
2. Is it possible for marginal utility to be negative and total
utility positive? Explain.
3. Suppose Mary is in consumer equilibrium. The
marginal utility of good A is 30, and the price of good
A is $2.
a. If the price of good B is $4, the price of good C is $3,
the price of good D is $1, and the price of all other
goods and services is $5, what is the marginal utility
of each of the goods Mary is purchasing?
b. If Mary has chosen to keep $10 in savings, what is
the ratio of MU to P for savings?
4. Using the following utility schedule, derive a demand
curve for pizza.
a. Assume income is $10, the price of each slice of
pizza is $1, and the price of each glass of beer is $2.
Then change the price of pizza
$2 per slice.
b. Now change income to $12 and derive a demand
curve for pizza.
Slices of
Pizza
total utility, 457
utility, 456
1
2
3
4
5
Total
Utility
200
380
540
600
630
Glasses of
Beer
1
2
3
4
5
Total
Utility
500
800
900
920
930
5. Using utility, explain the following commonly made
statements:
a.
I couldn't eat another bite.
b. I'll never get tired of your cooking.
c. The last drop tastes as good as the first.
d. I wouldn't eat broccoli if you paid me.
e. My kid would eat nothing but junk food if I allowed her.
f. Any job worth doing is worth doing well.
6. How would guests' behavior be likely to differ at a
BYOB (bring your own bottle) party from one at which
the host provides the drinks? Explain your answer.
7. A round of golf on a municipal golf course usually takes
about five hours. At a private country club golf course,
a round takes less than four hours. What accounts for
the difference? Would the time spent playing golf be
different if golfers paid only an admission fee
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Transcribed Image Text:KEY behavioral economics, 467 bounded rationality, 467 MS equilibrium, 467 consumer diminishing marginal utility, 456 disutility, 457 equimarginal principle, 463 marginal utility, 457 neuroeconomics, 471 EXERCISES 1. Using the following information, calculate total utility and marginal utility. a. Plot the total utility curve. b. Plot marginal utility directly below total utility. c. At what marginal utility value does total utility reach a maximum? Number of utils for the first unit Number of utils for the second unit Number of utils for the third unit Number of utils for the fourth unit Number of utils for the fifth unit Number of utils for the sixth unit Number of utils for the seventh unit Number of utils for the eighth unit Number of utils for the ninth unit 300 250 220 160 100 50 20 0 -250 2. Is it possible for marginal utility to be negative and total utility positive? Explain. 3. Suppose Mary is in consumer equilibrium. The marginal utility of good A is 30, and the price of good A is $2. a. If the price of good B is $4, the price of good C is $3, the price of good D is $1, and the price of all other goods and services is $5, what is the marginal utility of each of the goods Mary is purchasing? b. If Mary has chosen to keep $10 in savings, what is the ratio of MU to P for savings? 4. Using the following utility schedule, derive a demand curve for pizza. a. Assume income is $10, the price of each slice of pizza is $1, and the price of each glass of beer is $2. Then change the price of pizza $2 per slice. b. Now change income to $12 and derive a demand curve for pizza. Slices of Pizza total utility, 457 utility, 456 1 2 3 4 5 Total Utility 200 380 540 600 630 Glasses of Beer 1 2 3 4 5 Total Utility 500 800 900 920 930 5. Using utility, explain the following commonly made statements: a. I couldn't eat another bite. b. I'll never get tired of your cooking. c. The last drop tastes as good as the first. d. I wouldn't eat broccoli if you paid me. e. My kid would eat nothing but junk food if I allowed her. f. Any job worth doing is worth doing well. 6. How would guests' behavior be likely to differ at a BYOB (bring your own bottle) party from one at which the host provides the drinks? Explain your answer. 7. A round of golf on a municipal golf course usually takes about five hours. At a private country club golf course, a round takes less than four hours. What accounts for the difference? Would the time spent playing golf be different if golfers paid only an admission fee
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