None 10chocolate bars894200369avocados121215Refer to the figure above, which shows Nikita's budget constraint for avocadosand chocolate bars along with one of his indifference curves. At Nikita's optimalconsumption bundle (which is not explicitly labeled in the figure), his marginalutility from consuming an avocado is 24 utils. This means his marginal utilityfrom consuming another chocolate bar must be12 utils16 utils36 utilsnone of the above

Given the information provided, we can use the concept of marginal utility to determine the…

Answered: 10 chocolate bars 8 9 4 2 0 0 3 6 9…

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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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.
Suppose that a budget constraint intersects anindifference curve at two separate points. Caneither of these consumption bundles be optimal?Explain why or why not.
Robinson Crusoe lives in an island. There are onlytwo food sources in this island: coconut and berries. There is no money in the island but Robinsonuses his time to collect coconuts and berries. He sleeps 8 hours in a day. Collecting a coconut takes2 hours. Picking a pound of berries takes one hour. 1. Considering the food collection times as the prices in the island, write the budget line equationand draw Robinson’s budget line graphically. Specify the intercepts and the slope in the budgetline on the graph.Robinson falls from coconut tree and injures his leg. After the injury collecting coconut takes longer.He can only collect a coconut in 4 hours, but he can still pick berries at the same pace as before. 2. What happens to Robinson’s budget line? Show on the graph. Robinson’s injury makes him more sleepy. Now he sleeps 12 hours in a day. 3. What happens to Robinson’s budget line? Show on the graph.Two weeks after the injury, Robinson’s leg is slightly better, and he sleeps 8 hours…
Carol needs to decide how to spend her wealth on sh and chicken.For Carol, 1 lb of sh is equivalent to 2 lb of chicken. Her preferencecan be represented by the utility functionu(x; y) = 2x + ywhere x is the quantity of sh (in lbs) and y is the quantity of chicken(in lbs). The consumption set is R2+. (a) Draw two typical indi erence curves for Carol, one correspondingto a utility level of u1 and one corresponding to a utility level u2,where 0 < u1 < u2. Make sure you label the slope of the indif-ference curves and the intercepts with the horizontal and verticalaxes.(b) Suppose the price of sh is $1:5 per lb and and the price of chickenis $1 per lb. Carol has $20 to spend on sh and chicken.(i) Draw Carol's budget set, labeling the slope and the interceptpoints clearly.(ii) How much sh and chicken will Carol choose to purchase? I am looking for an answer to the points (c) and (d) below (c) Suppose now that the price of sh increases to $2 per pound.(i) Draw Carol's budget set,…
Take Jeremy’s 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 Jeremy’s utility. 6.1Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either callher on the land-line phone for five cents per minute or he can drive to see her, at a round-trip cost of $2 in gasolinemoney. He has a total of $10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses ahandy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values inTable 6.6, figure out the points on Jeremy’s consumption choice budget constraint (it may be helpful to do a sketch)and identify his utility-maximizing point.
A person in an economy in which they only consumetwo commodities, coffee and cake. This person always consumes thesecommodities together in a fixed ratio; whenever they drink a cup of coffee, they eat a single cake.This person has a budget of £99 to spend on coffee and cake.a. Draw a single diagram showing the relevant indifference curves and budgetlines for this person to show their optimal consumption bundle for the threedifferent examples of prices for coffee and cake listed below. Put thequantity of coffee on the horizontal axis of your diagram. Fully label yourdiagram, identifying the quantities of coffee and cake for the three optimalconsumption bundles. i. Price of coffee is £2 and the price of a cake is £1 ii. Price of coffee is £8 and the price of a cake is £1 iii. Price of coffee is £10 and the price of a cake is £1

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