1) Alex P. Keaton is an ardent baseball fan. The following table shows the relation between the number of games he attends per month during the season and the total utility he derives from baseball game consumption: Number of Baseball Games per Month 0 1 2 3 4 5 Total Utility 0 50 90 120 140 150 A. Construct a table showing Keaton's marginal utility derived from baseball game consumption. B. At an average ticket price of $25, Keaton can justify attending only one game per month. Calculate Keaton's cost per unit of marginal utility derived from baseball game consumption at this activity level. C. If the cost/marginal utility trade-off found in part B represents the most Keaton is willing to pay for baseball game consumption, calculate the prices at which he would attend two, three, four, and five games per month. <

1) Alex P. Keaton is an ardent baseball fan. The following table shows the relation between the number of games he attends per month during the season and the total utility he derives from baseball game consumption: Number of Baseball Games per Month 0 1 2 3 4 5 Total Utility 0 50 90 120 140 150 A. Construct a table showing Keaton's marginal utility derived from baseball game consumption. B. At an average ticket price of $25, Keaton can justify attending only one game per month. Calculate Keaton's cost per unit of marginal utility derived from baseball game consumption at this activity level. C. If the cost/marginal utility trade-off found in part B represents the most Keaton is willing to pay for baseball game consumption, calculate the prices at which he would attend two, three, four, and five games per month. <

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 8P

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Similar questions

Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
Praxilla, who lived in ancient Greece, derives utility from reading poems and from eating cucumbers. Praxilla gets 30 units of marginal utility from her first poem 27 units of marginal utility from her second poem 24 units of marginal utility from her third poem, and so on, with marginal utility declining by three units for each additional poem. Praxilla gets six units of marginal utility for each of her next three cucumbers consumed, five units of marginal utility for each of her next three cucumbers consumed, four units of marginal utility for each of the following three cucumbers consumed, and so on, with marginal utility declining by one for every three cucumber consumed. A poem costs three bronze coins hut a cucumber costs only one bronze coin. Praxilla has 18 bronze coins. Sketch Praxillas budget set between poems and cucumbers, placing poems on the vertical axis and cucumbers on the horizontal axis. Start off with the choice of zero poems and 18 cucumbers, and calculate the changes in marginal utility of moving along the budget line to the next choice of one poem and 15 cucumbers. Using this step-by-step process based on marginal utility, create a table and identify Praxillas utilityâ€”maximizing choice. Compare the marginal utility of the two goods and the relative prices at the optimal choice to see if the expected relationship holds. Hint: Label the table columns: 1) Choice, 2} Marginal Gain from More Poems, 3) Marginal Loss from Fewer Cucumbers, 4) Overall Gain or Loss, 5) Is the previous choice Optimal? Label the table rows: 1) 0 Poems and 18 Cucumbers, 2) 1 Poem and 15 cucumbers, 3) 2 Poems and 12 cucumbers, 4) 3 Poems and 9 Cucumbers, 5) 4 Poems and 6 cucumbers 6) 5 Poems and 3 Cucumbers, 7) 6 Poems and 0 Cucumbers.
Would you expect total utility to rise or fall with additional consumption of a good? Why?
The rules of politics are not always the same as the rules of economics. In discussions of setting budgets for government agencies, there is a strategy called closing the Washington Monument. When an agency faces the unwelcome prospect of a budget cut, it may decide to close a high-visibility attraction enjoyed by many people (like the Washington Monument). Explain in terms of diminishing marginal utility why the Washington Monument strategy is So misleading. Hint: If you are really trying to make the best of a budget cut, should you cut the items in your budget with tile highest marginal utility or line lowest marginal utility? Does the Washington Monument strategy cut the items with the highest marginal utility or line lowest marginal utility?
Is it possible for total utility to increase while marginal utility diminishes? Explain.