Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 8, Problem 1RQ
To determine
Systematic errors.
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3. Suppose that individuals with a strong enthusiasm for technology are willing to pay $500 now for the latest iPhone, but only $350 if they must wait a year. Normal people are willing to pay $250, and their desire to purchase does not vary with time. Assume for simplicity that there are equal numbers of each customer type (strong enthusiasm and normal), that the MC of the iPhone is $100, ignore the time value of money, and there are only two years. (Hint: With discrete problems consider all the different options and evaluate each of them to determine the optimal strategy. In this case, there are only three prices given and two time periods, so a total of 6 pricing strategies exist but some of them will.)
What is the highest profit level that can be achieved if the price for an iPhone is fixed for both years (uniform pricing)?
What is the highest profit level that can be achieved if the price for an iPhone can be altered across the two years?
3. Suppose you won $15 on a lotto ticket at the local 7-Eleven
and decided to spend all the winnings on candy bars and
bags of peanuts. Candy bars cost $0.75 each while bags of
peanuts cost $1.50 each. LO1.5
a. Construct a table showing the alternative combinations
of the two products that are available.
b. Plot the data in your table as a budget line in a graph.
What is the slope of the budget line? What is the oppor-
tunity cost of one more candy bar? Of one more bag of
Caci, un
he would spend a dollar buying a first cup of coffee? LO7.2
4. 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, $18, $6, $4, and $24
and that Ricardo has an income of $106. LO7.2
a. What quantities of A, B, C, and D will Ricardo purchase in
maximizing his utility?
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.
nuts, coffee, or both. How big would that buuget nave LU DC DCIUIU
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