A. Each week, Adriel buys cheese (C) and sausage (S) which provides him a utility of U= 5th root of (C2 S). If he allocates Php200 of his weekly income to buy cheese that costs Php 20 per unit, and sausage that costs Php 10 per unit, To maximize her utility, he will buy the quantity of cheese [ Select ] times that of sausage. This means that he will spend his weekly budget where cheese amounts to a total of Php [ Select] M and sausage amount to a total of Php [ Select ] This gives him a total utility equal to [ Select]

A. Each week, Adriel buys cheese (C) and sausage (S) which provides him a utility of U= 5th root of (C2 S). If he allocates Php200 of his weekly income to buy cheese that costs Php 20 per unit, and sausage that costs Php 10 per unit, To maximize her utility, he will buy the quantity of cheese [ Select ] times that of sausage. This means that he will spend his weekly budget where cheese amounts to a total of Php [ Select] M and sausage amount to a total of Php [ Select ] This gives him a total utility equal to [ Select]

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 3SQP

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22. Peanut butter (PB) sells for 10 dollars per pound and Oysters (O) sell for 50 dollars perpound. Suppose Pat buys 5 pounds of peanut butter and one pound of oysters each month.With this consumption bundle, his MRSP B,O = 3. Which of the following is true (assumingPat’s preferences satisfy all the basic assumptions of consumer theory)?(a) Pat could increase his utility by buying more oysters and less peanut butter.(b) Pat could increase his utility by buying more peanut butter and less oysters.(c) Pat could increase his utility by buying more peanut butter and more oysters.(d) Pat could increase his utility by buying less peanut butter and less oysters.
Suppose that Omar’s marginal utility for cups of coffee is constant at 1.5 utils per cup no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the third he eats, and so on (that is, declining by 1 util per additional doughnut). In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on doughnuts, coffee, or both. How big would that budget have to be before he would spend a dollar buying a first cup of coffee?
Mats, who has reference-dependent preferences over beer and money, goes to the local pub with a friend, but is not planning on drinking any beer or spending any of his 50 Euro in cash. Let his end-of-evening outcomes in pints of beer consumed and cash be c1 and c2, respectively, and let his reference point in pints of beer and cash be r1 and r2, respectively. Then, Mats’ utility is given by v(6c1 − 6r1) + v(c2 − r2), where v(x) = x for x ≥ 0, and v(x) = 1.5x for x < 0. (a) Suppose that the price of beer is pB. Calculate Mats’ utility from drinking one pint of beer at this price. What is Mats’ utility from drinking no beer? And, comparing these two utility values, what is the maximum price pB that Mats would pay for one beer? (b) Suppose that Mats unexpectedly gets a pint of beer as part of a promotion at the pub, and incorporates its consumption into his reference point in beer. [Hint: this means that (r1, r2) = (1, 50).] Suppose that Mats could sell the beer at a price pS.…
John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke, or does he show increasing marginal utility for Coke? Supposethat John has $3 in his pocket. If Cokes cost $1 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too? What about the third dollar? If John’s marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke?
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During any year, I can consume any amount that doesnot exceed my current wealth. If I consume c dollars duringa year, I earn ca units of happiness. By the beginning of thenext year, the previous year’s ending wealth grows by afactor k.a Formulate a recursion that can be used to maximizetotal utility earned during the next T years. Assume Ioriginally have w0 dollars.b Let ft(w) be the maximum utility earned during years t, t 1, . . . , T, given that I have w dollars at the be-ginning of year t; and ct(w) be the amount that should be consumed during year t to attain ft(w). By workingbackward, show that for appropriately chosen constantsat and bt,ft(w) btwa and ct(w) atwInterpret these results.
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3. Suppose that Omar’s marginal utility for cups of coffee is constant at 1.5 utils per cup, no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the third he eats, and so on (that is, declining by 1 util per additional doughnut). In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on doughnuts, coffee, or both. How big would that budget have to be before he would spend a dollar buying a first cup of coffee? *use tables and/or graphs if possible, please original work
Every month, a family of three spends $2,000 on food (F) and other items (O). The family’s preferences are represented by the utility function U(F,O) = F1/5O4/5. The unit price of food and the unit price of other items are both $1. Find this family’s monthly food expenditure.The family could join a consumers’ club. At the club, food costs 20% less than in other stores (i.e., at the food club PF = $0.8)
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