Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 21, Problem 3E
To determine
(a)
To determine
(b)
Ratio of MU to P for savings.
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Students have asked these similar questions
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?
Columns 1 through 4 in the accompanying table show the marginal utility, measured in utils, that Ricardo would get by purchasing
various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the price of
good A is $18, the price of good B is $6, the price of good C is $4, and the price of good D is $24. Ricardo's income is $106.
Column 1
Units of A
1
2
3
4
B=
5
6
7
B
units.
C= 3 units.
MU
72
54
45
36
27
18
15
12
Unit A
4 +5 18
Units of B
1
2
3
Column 21
4
5
6
7
8
MU
24
15
12
Unit B
9
7
5
2
1
+0 6
Units of C
1
2
3
Instructions: Enter your answers as whole numbers.
a. What quantities of A, B, C, and D will Ricardo purchase in maximizing his utility?
A = 4 units.
4
5
6
Unit C
7
Column 3
8
MU
15
12
8
7
5
4
3.5
3
Amount of
Savings
G
Units of D
1
24
2
3
4
D-0 units.
b. How many dollars will Ricardo choose to save? $
c. Check your answers by substituting them into the algebraic statement of the utility-maximizing rule.
5
6
Column 4
7
8…
Q. Bridget has a limited income and consumes only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget's utility, while the last pound of cheese added 40 units.
a. Is Bridget making the utility-maximizing choice? Why or Why not?
b. If not, what should she do instead? Why?
Please provide the correct answer. Thank you!
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Similar questions
- Suppose you have a budget of 30 to spend on two goods: pizzas and burgers. Each pizza is $5 while each burger is $10. Suppose you already purchased 6 pizzas. What is the maximum number of burgers that you can buy with the remaining funds in your budget?arrow_forwardThe following table depicts a consumer's utility from consuming two goods, Fish and Chips. Units of Fish Utility from Fish Units of Chips Utility from Chips 6 1 3 2 11 2 7 3 14 3 12 4 15 4 18 If the consumer has a budget, the price of Fish is $5, and the price of Chips is $2, what is the first unit that this consumer will want to consume? The consumer is indifferent about what to buy first. Fish, because it provides the most marginal utility per dollar. Chips, because it is cheaper. Fish, because it provides the most marginal utility. Chips, because it provides the most marginal utility per dollar.arrow_forwardSuppose utility can be measured by "utils" and that Jim buys both coffee and bagels. The price of coffee is $2 and the price of a bagel is $3. If Jim is currently consuming coffee and bagels such that the marginal utility from the last cup of coffee consumed was 6 utils and the marginal utility from the last bagel consumed was 12 utils, is Jim maximizing utility? Why or why not? If not, what should Jim do? Explain in detail.arrow_forward
- 25 Columns 1 through 4 in the following table show the marginal utility, measured in utils, that Ricardo would get by purchasing various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the prices of A, B, C, and D are, respectively, $9, $3, $2, and $6 and that Ricardo has an income of $71. Column 1 Column 2 Column 3 Column 4 Column 5 Units of Good A Units of Units of Units of MU MU MU MU Good B Good C Good D Number of Dollars Saved MU 1 72 1 24 1 15 1 36 1 5 2 54 2 15 2 12 2 30 2 4 3 45 3 12 3 8 3 24 3 3 4 36 4 9 4 7 4 18 4 2 5 27 5 7 5 5 5 13 5 1 6 18 6 5 6 4 6 7 6 0.50 7 15 7 2 7 3.5 7 4 7 0.25 8 12 8 1 8 3 8 2 8 0.13 Instructions: Enter your answers as a whole number. a. What quantities of A, B, C, and D will Ricardo purchase in maximizing his utility? 4 units of A 3 units of B units of C units of D b. How many dollars will Ricardo choose to save?arrow_forward#16. Joanna is deciding between consuming Good X and Good Y. At her current level of consumption, her marginal utility per dollar for Good X is greater than the marginal utility per dollar for Good Y. To achieve the consumer optimum, Joanna needs to a. consume more of Good Y until the marginal utility per dollar for Good Y is greater than the marginal utility for Good X. b. consume more of Good X until the marginal utility per dollar for Good Y is greater than the marginal utility for Good X. c. consume more of both Good X and Good Y until the marginal utility per dollar for Good Y is greater than the marginal utility for Good X. d. consume more of Good X or less of Good Y until the marginal utility per dollar for Good X and Good Y is equal. e. continue at her current level of consumption.arrow_forwardImagine a pizza, with a question: How does each slice of pizza you consume impact your utility for the next?arrow_forward
- Explain why it is that as the consumer purchases more of a good, her marginal utility falls while her total utility rises.arrow_forwardThe budget set, or budget constraint, in the graph shows the possible combinations of brownies and ice cream cones that can be purchased. Assume that this person has a total of $18 to spend on brownies and ice cream cones. How much does a brownie cost? $ Assume that at point A, the marginal utility from a brownie is 10 and the marginal utility for an ice cream cone is 18. This person is utility maximizing. should consume more brownies and fewer ice cream cones. should consume more ice cream cones and fewer brownies. Brownies 18- 16- 14- 12- 10- 8- 6- 4 2. 0 1 2 3 1 A 1 + 4 5 Budget constraint 6 7 8 9 10 11 12 13 14 Ice cream conesarrow_forwardBob consumes food and housing. Suppose his marginal utility from an additional unit of food is 20 and his marginal utility from an additional unit of housing is 180. Furthermore, suppose the price of a unit of food is $1.00 and the price of a unit of housing is $2.00. Can Bob increase his utility without changing his total expenditures on food and housing? Holding expenditures constant, A. Bob can increase utility by spending more on food and less on housing. B. Bob can increase utility by spending more on food and the same amount on housing. C. Bob can increase utility by spending less on food and more on housing. D. Bob cannot increase his utility. E. Bob can increase utility by spending more on food and more on housing.arrow_forward
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