Principles of Microeconomics (12th Edition)
12th Edition
ISBN: 9780134078816
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 2.3P
(a)
To determine
The
(b)
To determine
The law of diminishing marginal utility.
(c)
To determine
What quantity of Cigars and Brandy will maximize satisfaction?
(d)
To determine
The changes in marginal utility and marginal utility per dollar when price increases to $9.
(e)
To determine
What quantity of Cigars and Brandy will consumer purchase after the price change?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
b) Diana has $6.00 to spend. She has the option to buy two goods: sandwiches and
peppermints. Sandwiches cost $3.00 each, and peppermints cost $1.00 per pack. The table
below shows the utility Diana derives from consuming sandwiches or peppermints at
various levels of consumption.
In the table below, compute and complete the table below for the marginal utility per
dollar for each level of consumption.
i.
Peppermints
Marginal Utility/
$ (price per each)
Sandwiches
Marginal
Utility
Marginal utility/
$ (price per each)
Marginal
Utility
Units
purchased
1
9
15
9
3
4
4
n/a
n/a
1
ii.
Briefly explain how Diana should spend the first $3.00.
Consider the figures to the right. Suppose that the individual currently consumes 5 digital apps. What
happens to the person's total utility if they reduce their consumption to 4 units? Why does this fact imply
that the marginal utility curve cuts through the horizontal axis of the lower figure between the fourth and
fifth app consumed?
Reducing consumption to 4 apps from 5 apps leaves total utility
at
utils in the upper
, which is the
figure. Hence, the marginal utility between these two quantities of apps equals
value of the
axis in the lower figure. Thus, the marginal utility curve crosses the
axis of the lower figure between units 4 and 5. (Enter your responses as
whole numbers.)
Marginal Utility (utils per week)
6-
4-
22
Total Utility (utils
+ q r
per week)
14-
12-
10-
20
ø Ø
18-
04
0
Downloaded Digital Apps Utilized per Week
Downloaded Digital Apps Utilized per Week
G
Q
For the utility function above, if the price of the good is $4, what is the marginal Utility per Dollar for the fourth unit consumed?
For the utility function above, if the price of the good is $2, what is the marginal Utility per Dollar for the second unit consumed?
Chapter 6 Solutions
Principles of Microeconomics (12th Edition)
Knowledge Booster
Similar questions
- Kai’s current marginal utility from consuming orange juice is 50 utils per ounce and her marginal utility from consuming coffee is 50 utils per ounce. If orange juice costs $0.25 per ounce and coffee costs $0.20 per ounce, is Kai maximizing her total utility from the two beverages? Instructions: Enter your responses as whole numbers. At her current level of consumption, Kai receives: utils per dollar spent on orange juice.At her current level of consumption, Kai receives: utils per dollar spent on coffee.Therefore, Kai maximizing her total utility because MUoj/Poj is MUc/Pc. Kai’s current marginal utility from consuming orange juice is 50 utils per ounce and her marginal utility from consuming coffee is 50 utils per ounce. If orange juice costs $0.25 per ounce and coffee costs $0.20 per ounce, is Kai maximizing her total utility from the two beverages? Enter your responses as whole numbers. At her current level of consumption, Kai receives: utils per dollar…arrow_forwardSuppose that U(f,c) = f + 8c^(1/2)is a utility function that describes Amelia’s preferences over two goods: fish(f)and custard (c). For the following, think of fish as the good graphed on the horizontal axis.a. Derive an expression for her marginal utility (Uf)from a small increase in f holding c fixed. Also find themarginal utility for custard (Uc).b. What is Amelia’s marginal rate of substitution (MRS)? Give a brief (2 sentences maximum) intuitivedescription of what MRS represents. If Amelia has 4 units of custard, holding her utility constant, howmany units of custard would she be willing to give up in order to get one more unit of fish?c. Graph Amelia’s indifference curve for a utility level of 40. Be sure to specify at least 3 bundles of goodson the indifference curve.d. Does the fact that Amelia’s indifference curve intersects with the custard axis violate any of the 5properties of indifference curves? Briefly support your answer.e. Give another utility function that represents…arrow_forwardLet us consider the case of Sabbir who has the option of consuming two products, peaches and oranges. In the initial situation, Sabbir consumes a specific quantity of peaches and a specific quantity of oranges. As a result, the value of marginal utility per pound spent on peaches is less than the value of marginal utility per pound spent on oranges. Which of the following options should be adopted by Sabbir if he wants to increase his total utility from the consumption of peaches and oranges compared to the initial situation? a. He should increase his expenditure on peaches and he should decrease his expenditure on oranges compared to the initial situation b. He should decrease his expenditure on peaches and he should increase his expenditure on oranges compared to the initial situation c. He should increase his expenditure on both peaches and oranges compared to the initial situation d. He should decrease his expenditure on both peaches and oranges compared to the initial situationarrow_forward
- Megan enjoys consuming both cheese and fruit. Each pound of cheese costs Pc = $1, and each pound of fruit costs Pp = $2. Suppose that Megan buys 30 pounds of cheese and 20 pounds of fruit per week. The following graphs show her marginal utility curves for cheese and fruit. At her current consumption level, Megan's marginal utility from consuming the last pound of cheese she bought is MUC = 12 utils per pound, and her marginal utility from consuming the last pound of fruit she bought is MUR = 12 utils per pound. MU OF CHEESE (Utils per pound) 24 20 16 12 m 0 10 40 20 30 CHEESE (Pounds per week) Is Megan currently maximizing her utility? 50 60 ? MU OF FRUIT (Utils per pound) 24 20 16 12 8 4 0 0 10 40 20 30 FRUIT (Pounds per week) 50 Yes; the marginal utility she receives from her last pound of cheese equals that of her last pound of fruit. No; she likes fruit and cheese more than other goods, so she should buy more of both. No; she could buy less fruit and more cheese, not spend any more…arrow_forwardThe tables show the utility Parker experienced from consuming varying quantities of waffles and pancakes. Assume that waffles cost $2.00 each, pancakes cost $1.00 each, and that Parker has $8.00 to spend on these two goods. Since Parker cannot afford more than four waffles or eight pancakes, the utility is given only for quantities smaller than these. Quantity of waffles Total utility of waffles Marginal utility of waffles 1 100 100 2 180 80 3 240 60 4 270 30 Quantity of pancakes Total utility of pancakes Marginal utility of pancakes 1 40 40 2 70 30 3 90 20 4 105 15 5 115 10 6 120 5 7 123 3 8 125 2 Given his budget constraint, determine what quantities of waffles and pancakes Parker will consume to maximize utility. quantity of waffles: waffleswaffles quantity of pancakes: pancakesarrow_forwardsolve this correctlyarrow_forward
- Joyce drinks both coffee (x) and tea (y). Her preferences over these two goods can be represented by the utility function U(x,y) =x + 3y^1/2 where x represents the number of pounds of coffee and y represents the number of cups of tea. a) Given her preferences, find her demand functions for coffee (x) and tea (y). b) Suppose that the price of a pound of coffee is $4 and that she has $56 to spend on coffee and tea. Write her demand curve for tea. Illustrate her demand curve. c) Suppose that the price of a cup of tea is $1 (the price of coffee and income remain $4 and $56, resp.). Use your demand functions to find her best bundle. In an indifference curve diagram illustrate her best bundle at these prices. For the remainder of the question, assume that her income rises to $60 and that the prices of coffee and tea are unchanged at = $4 and =1.arrow_forwardAmrita, a utility maximizing consumer, consumes only two normal goods, Breakfast Cereal and Bread Loaf. She is currently consuming 12 packets of Cereal and 16 bread loafs a week. If the price of Cereal increases (and everything else stays the same) we would expect Amrita to consume fewer bread loafs per week. Do you agree? Why/Why not?arrow_forwardWhen do we differentiate between using the formula MU(x) = TU(x) – TU(x – 1) and Marginal Utility = Change in Total Utility (ΔTU) / Change in No. of Units Consumed (ΔQ) when calculating marginal utility. This is confusing to me. On that note, which formula should we use for the below scenario? Part 1 Given the quantity of total movie tickets and total concession stand items consumed in a month and the total utility derived at Ruby Red Movie Theater for each, calculate the marginal utility and the marginal utility per dollar for movie tickets and average concession stand items. Step 1: Calculate marginal utility and marginal utility per dollar for movie tickets. Quantity of Tickets Consumed Total Utility Marginal Utility Movie Ticket Price Marginal Utility Per Dollar for Movie Tickets 0 0 --- --- --- 200 150 $10.00 400 275…arrow_forward
- Please answer fastarrow_forwardplease explain the marginal utility and when exactly to use it ?arrow_forward1. Suppose that U (f,c) = f + 8c² is a utility function that describes Amelia's preferences over two goods: fish (f) and custard (c). For the following, think of fish as the good graphed on the horizontal axis. Derive an expression for her marginal utility (Uf) from a small increase in f holding c fixed. Also find the marginal utility for custard (U.). b. What is Amelia's marginal rate of substitution (MRS)? Give a brief (2 sentences maximum) intuitive description of what MRS represents. If Amelia has 4 units of custard, holding her utility constant, how many units of custard would she be willing to give up in order to get one more unit of fish? c. Graph Amelia's indifference curve for a utility level of 40. Be sure to specify at least 3 bundles of goods on the indifference curve. d. Does the fact that Amelia's indifference curve intersects with the custard axis violate any of the 5 properties of indifference curves? Briefly support your answer. a. Give another utility function that…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc