Rhea is determining how many gallons of milk (M) and loaves of bread (B) to purchase. Use the information in italics to answer the bolded question below: • Rhea's marginal utility function for milk: MUM Rhea's marginal utility function for bread: = 0.5M-B MUB=0.5MB Rhea has $60 to spend on bread and milk. • The price of milk (Pm) is $3/gallon of milk. • The price of bread (Pb) is $1/loaf of bread. . For the sake of computation, assume that bread is the horizontal axis good (i.e., good X) and milk is the vertical axis good (i.e., good Y). When you set up the optimal budget decision rule for Rhea's consumer problem, which of the following statements best describes how much she will buy of both goods at her consumer equilibrium? For each gallon of milk, Rhea will buy 1/3 loaf of bread. O For each gallon of milk, Rhea will buy 3 loaves of bread. For each gallon of milk, Rhea will buy 1 loaf of bread. O For each gallon of milk, Rhea will buy 6 loaves of bread.

Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter5: Consumer Choice: Individual And Market Demand
Section: Chapter Questions
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Rhea is determining how many gallons of milk (M) and loaves of bread (B) to purchase. Use the
information in italics to answer the bolded question below:
Rhea's marginal utility function for milk:
MUN
• Rhea's marginal utility function for bread:
M = 0.5M-2
MUB
=
0.5MB-1/2
• Rhea has $60 to spend on bread and milk.
• The price of milk (Pm) is $3/gallon of milk.
• The price of bread (Pb) is $1/loaf of bread.
• For the sake of computation, assume that bread is the horizontal axis good (i.e., good X) and milk is
the vertical axis good (i.e., good Y).
When you set up the optimal budget decision rule for Rhea's consumer problem, which of
the following statements best describes how much she will buy of both goods at her
consumer equilibrium?
O For each gallon of milk, Rhea will buy 1/3 loaf of bread.
O For each gallon of milk, Rhea will buy 3 loaves of bread.
For each gallon of milk, Rhea will buy 1 loaf of bread.
O For each gallon of milk, Rhea will buy 6 loaves of bread.
Transcribed Image Text:Rhea is determining how many gallons of milk (M) and loaves of bread (B) to purchase. Use the information in italics to answer the bolded question below: Rhea's marginal utility function for milk: MUN • Rhea's marginal utility function for bread: M = 0.5M-2 MUB = 0.5MB-1/2 • Rhea has $60 to spend on bread and milk. • The price of milk (Pm) is $3/gallon of milk. • The price of bread (Pb) is $1/loaf of bread. • For the sake of computation, assume that bread is the horizontal axis good (i.e., good X) and milk is the vertical axis good (i.e., good Y). When you set up the optimal budget decision rule for Rhea's consumer problem, which of the following statements best describes how much she will buy of both goods at her consumer equilibrium? O For each gallon of milk, Rhea will buy 1/3 loaf of bread. O For each gallon of milk, Rhea will buy 3 loaves of bread. For each gallon of milk, Rhea will buy 1 loaf of bread. O For each gallon of milk, Rhea will buy 6 loaves of bread.
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