Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 20, Problem 4CQ
To determine
Utility maximizing condition
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A consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is $30, and T-shirts cost $10. At the current rate of consumption, the marginal utility of jeans is 60, and the marginal utility of T-shirts is 30. Is this consumer maximizing his or her utility? Would you suggest that he buy more jeans and fewer T-shirts, or more T-shirts and fewer jeans?
Suppose John decides to buy 4 units of food and 4 units of clothing with his $12 budget. Would his marginal utility per dollar spent on food be greater than or less than his marginal utility per dollar spent on clothing? What does this tell you about how he should substitute food for clothing if he wanted to increase his utility without spending any more money?
Aria consumes only two goods, food and clothing. The marginal utility of the last dollar she spends on food is 12, and the marginal utility of the last dollar she spends on clothing is 9. The price of food is $1.20/unit, and the price of clothing is $0.90/unit. Is Aria maximizing her utility?
Chapter 20 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- A consumer has a budget to spend on Shoes and Socks. At their current levels of consumption, they spend their entire budget and receive 0.60 marginal utility per dollar from Shoes and 0.40 marginal utility per dollar from Socks. How should they change their consumption to maximize their utility? Buy more Shoes and fewer Socks. Buy only Shoes, and no Socks. Buy more Shoes and more Socks. Buy only Socks, and no Shoes. Buy fewer Shoes and more Socksarrow_forwardAt what point does a consumer maximize utility?arrow_forwardAmy is currently spending all of her budget and she finds that the marginal utility per dollar from dresses is less than the marginal utility per dollar from hats. To maximize her utility, Amy should buy fewer dresses and hats. more hats and fewer dresses. more dresses and fewer hats. more dresses and hats. probably change her purchases but more information is needed to determine if she should buy more or fewer dresses and hats.arrow_forward
- What is meant by Utility ?arrow_forwardThe table details the total utility that J.J. gets from going to see basketball and hockey games during a month. J.J. had $120 to spend. Calculate the marginal utility and the marginal utility per dollar spent for both basketball and hockey given that the price is $20 and $30 respectively. Based on your calculations: how many basketball games would he attend? how many hockey games would he attend?arrow_forwardwhat is A curve showing combinations of two goods that provide a consumer with a constant amount of utility ?arrow_forward
- How can one's choice of purchases/consumption be infuenced by utility or marginal utility?arrow_forwardIf this consumer has $13.00 to spend on cans of beer and slices of pizza in any given week, then what is the optimal combination of beer and pizza for the consumer to buy to maximize utility?arrow_forwardA consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is $60, and shirts cost $10. At the current rate of consumption, the marginal utility of jeans is 240, and the marginal utility of shirts is 30. Based on the model of consumer choice, what should this consumer do to maximize utility? Purchase fewer shirts and more jeans. Purchase more shirts and fewer jeans. Purchase only jeans. This consumer is already maximizing utility. Purchase only shirts.arrow_forward
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