EBK MICROECONOMICS
5th Edition
ISBN: 9781118883228
Author: David
Publisher: YUZU
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Chapter 3, Problem 3.23P
To determine
The ordinal ranking of D and W is to be evaluated.
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Mattie consumes milk and cookies. Assume Mattie has a strictly diminishing marginal rate of substitution over these two
goods. Suppose Mattie is currently spending all of her available income on a bundle of milk and cookies. At her current
bundle of milk and cookies, Mattie's marginal utility from consuming an additional glass of milk is 2 utils and her marginal
utility from consuming an additional cookie is 6 utils. If the price of a cookie is $3 and the price of a glass of milk is $1, which
one of the following statements must be true? (Select A, B, C, or D)
A. Mattie should consume more milk and fewer cookies
B.
Mattie should consume more cookies and less milk
C. Mattie's current bundle of milk and cookies maximizes her utility
D. There is not enough information to know whether Mattie should consume more milk or more cookies
Joe is currently in consumer equilibrium by consuming cheese and crackers,
such that the last cracker consumed yielded 8 utils and the last piece of
cheese consumed yielded 12 utils. Assume the price of crackers is two cents
per cracker and the price of cheese is three cents per piece. If the price of
crackers increases to four cents, Joe should
his consumption of
crackers and his marginal utility from crackers will
and also
his consumption of cheese and his marginal utility from cheese will
(Assume he is in the downward sloping portion of the MU curve.)
Ο Ο Ο
decrease; increase; increase; decrease
increase; increase; increase; increase
increase; decrease; increase; decrease
increase; increase; decrease; decrease
Suppose that Dale consumes only coffee and cheese, both of which have diminishing marginal utility. For each of the following cases, determine whether Dale should
1Consume more coffee and less cheese, or2Consume less coffee and more cheese:
1.The marginal rate of substitution of cheese for coffee is 3 (i.e., the marginal utility of cheese is three times the marginal utility of coffee), while the price ratio is 2 (i.e., cheese costs twice as much as coffee).
2.The marginal rate of substitution of cheese for coffee is 1 (i.e., the marginal utility of cheese is equal to the marginal utility of coffee) while the price ratio is 2 (i.e., cheese costs twice as much as coffee).
3.The marginal rate of substitution is initially equal to the price ratio, but the price of coffee increases.
4.The marginal rate of substitution is initially equal to the price ratio, but the price of cheese decreases.
5.The marginal rate of substitution is initially equal to the price ratio, but Dale enters exam…
Chapter 3 Solutions
EBK MICROECONOMICS
Ch. 3 - Prob. 1RECh. 3 - Prob. 2RECh. 3 - Prob. 3RECh. 3 - Prob. 4RECh. 3 - Prob. 5RECh. 3 - Prob. 6RECh. 3 - Prob. 7RECh. 3 - Prob. 8RECh. 3 - Prob. 9RECh. 3 - Prob. 10RE
Ch. 3 - Prob. 11RECh. 3 - Prob. 3.1PCh. 3 - Prob. 3.2PCh. 3 - Prob. 3.3PCh. 3 - Prob. 3.4PCh. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Prob. 3.7PCh. 3 - Prob. 3.8PCh. 3 - Prob. 3.9PCh. 3 - Prob. 3.10PCh. 3 - Prob. 3.11PCh. 3 - Prob. 3.12PCh. 3 - Prob. 3.13PCh. 3 - Prob. 3.14PCh. 3 - Prob. 3.15PCh. 3 - Prob. 3.16PCh. 3 - Prob. 3.17PCh. 3 - Prob. 3.18PCh. 3 - Prob. 3.19PCh. 3 - Prob. 3.20PCh. 3 - Prob. 3.21PCh. 3 - Prob. 3.22PCh. 3 - Prob. 3.23PCh. 3 - Prob. 3.24PCh. 3 - Prob. 3.25PCh. 3 - Prob. 3.26P
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- Suppose an individual is currently spending all of their income on a bundle of books and pizza, but they are not sure whether the bundle maximizes their utility. Assume the individual has a strictly diminishing marginal rate of substitution over these two goods. At their current bundle of books and pizza, the individual's marginal utility from consuming books is 6 utils and their marginal utility from consuming pizza is 3 utils. If the current price of a book is $12 and the price of a pizza is $7, which of the following statements must be true: A. The individual can increase their utility by consuming more books and less pizza B. The individual is maximizing their utility C. The individual can increase their utility by consuming more pizza and fewer booksarrow_forwardSuppose utility can be measured by "utils" and that Jane is consuming both lemons and cookies. The marginal utility from the last lemon consumed was 8 utils whereas the marginal utility from the last cookie consumed was 16 utils. Is it possible that Jane is maximizing total utility given the current combination of lemons and cookies consumed? Describe in detail what relationship would have to hold between the prices of lemons and cookies in order for Jane to be currently maximizing total utility.arrow_forwardCarlos is originally consuming his optimal consumption bundle of cell phones and gasoline when the price of gasoline falls. Assume that both gasoline and cell phones are normal goods. How will a decrease in the price of gasoline affect your consumption of cell phones and gasoline? Explain using the substitution and income effects.arrow_forward
- Suppose 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_forwardDraw the following scenario: Assume that Sam has well-behaved preferences and consumes hamburgers (vertical axis) and steak (horizontal axis). Further, Talib perceives hamburgers as an inferior good and steak as a normal good. Draw the effect of a decline in the price of steak on Sam’s optimal consumption of hamburger and steak. Make sure you show both substitution and income effects on both goods (axes).arrow_forwardIf consumers buy less of a commodity when their incomes rise, this commodity is ( an inferior good , or a normal good ) ? . When the price of this commodity rises, the substitution effect is ( negative or postive) and the income effect is ( negative or postive) ? . So the net result for consumption of this commodity ( depends on which effect dominates , is an increase , is a decrease) ? .arrow_forward
- Carol has very weird preferences. She only cares about quantity. When evaluating a bundle, Carol only looks at the highest amount of a good she can consume in each bundle, regardless of whether it is of eggs or dumplings. She is indifferent between two bundles only when the largest consumption of a good within each bundle is the same across bundles. So, for instance, if a bundle offers 5 eggs and 1 dumpling she finds that bundle indifferent to a bundle offering 4 eggs and 5 dumplings. These preferences are transitive. But are they monotone? And convex?arrow_forwardJessica consumes two goods, X and Y. The quantities of X and Y that Jessica may consume are denoted by r and y, respectively. For bundles such that 0.5x 2r, then she only cares about the quantity of X, the more of it, the better, but increasing y leaves her in the same indifference curve: any bundle (r, y) such that y > 2r is indifferent to the bundle (r, 2r). Suppose that Jessica's income is M = 20 and the prices of X and Y are, respectively, Pz = 4 and p, = 2. (a) Write the equation of Jessica's budget line. Setting the quantity of X in the horizontal axis, graph Jessica's budget line. (b) In a new graph, with the quantity of X on the horizontal axis, draw the indifference curve that contains the bundle (r, y) = (6, 3) and the indifference curve that contains the bundle (r, y) = (2, 6). (c) Find Jessica's optimal bundle. Draw a new graph and represent this bundle, the budget constraint, and the indifference curve containing this bundle. (d) Suppose that the price of Y increases to…arrow_forwardYou are choosing between two goods, X and Y, and your marginal utility from each is as shown in the following table. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what quantities of each will you purchase to maximize utility? What total utility will you realize? Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase? Using the two prices and quantities for X, derive a demand schedule (a table showing prices and quantities demanded) for X.arrow_forward
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