EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 13A.1, Problem 1MQ
To determine
To graph of utility maximizing choice of the individual who works for seven hours every day irrespective of wage offered to her.
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- Suppose Coffee and Tea have a perfect substitute indifference curve, with Coffee on the X-axisand Tea on the Y-Axis. We are also given that for the person, MRS = 10 and MRS < Px/Py.Graphically show and explain the optimal choice of the person. Show the necessarymathematical work to accompany your answer.arrow_forwardJanie works for an accounting firm. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. Before her raise, if Janie decreases her hours of work from 30 to 20 hours per week, the marginal utility gain from having more leisure is: Hours of Leisure Total Utility from Leisure Income Total Utility from Income 0 0 0 0 10 29 300 40 20 54 400 72 30 75 600 96 40 86 800 108 50 92 900 116 1200 120 1500 122 1600 124 2000 125 Question 4 options: 29 21 13 7arrow_forwardUsing a graph of budget lines and indifference curves, show how an increase in the price of bananas affects the amount of time the individual works.arrow_forward
- Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F Total income is $120 and per unit prices of Food (F) and Cloth (C) are $2 and $10, respectively, then: a) What is the value of MRS at the optimal point and what does this value mean? b) What is the optimal consumption bundle i.e (F*,C*)? c) Also plot the budget line and clearly depict the point of optimality in the F (x-axis)-C (y-axis) spacearrow_forwardTerry attends college and works part-time in a drug store. She can work up to 40 hours each week and is paid $9 per hour. The following table shows her utility from different levels of leisure and income. Refer to the attached picture for the table. 1. Fill in the Marginal Utility columns above. 2. What will be Terry’s total utility from both leisure and income when working 20 hours per week?arrow_forwardAssume you can work as many hours you wish at £12 per hour (net of tax). If you do not work, you have no income. You have no ability to borrow or lend, so your consumption, c, is simply equal to your income. Assume that your optimal choice of consumption and leisure is to work 8 hours per day. Illustrate this choice diagrammatically using the feasible set and indifference curves.arrow_forward
- Labor-Leisure choice. Uses 80 hour maximum work week. Utility = R3C2 R = leisure C = dollar amount of income for consumption Budget Line 1: Wage = $16 per hour. No other income. Draw the Labor-Leisure diagram, including the budget line. Solve the point of optimization, and label it point A. Draw the indifference curve. Label it U1 Budget Line 2: Wage = $22 per hour. No other income. Draw the budget line for this new $22 wage. Solve the point of optimization, and label it point B. Draw the indifference curve. Label it U3 Use an auxiliary budget line to separate the income effect from the substitution effect. Identify the substitution effect as point S. Draw the indifference curve. Label it U2 The point of optimization for part C can be labeled, rather than numerically solved, as long as the drawn answers show expected results for two normal goods.arrow_forwardsuppose a consumer's marginal rate of substitute is three slice of pizza for one coke . if the price of coke is $1 and the price of three slices of pizza is $2 , would the consumer change his on her consumption combinationarrow_forwardConsider a utility function: U (F,C) = FC so MU_F = C and MU_C = F Suppose as Case 1, Total income is $100 and per unit prices of Food (F) and Cloth (C) are $2 and $10, respectively, then: a) What is the value of MRS at the optimal point and what does this value mean? b) What is the optimal consumption bundle i.e (F*,C*)? c) Also plot the budget line and clearly depict the point of optimality in the F (x-axis)-C (y-axis) space Now assume a new Case 3, where instead of one time income change, Pc' = $15, holding all else the same as in Case 1, do the same analysis (parts a-c) and contrast your answers to Case 1. For part c, you should draw old (Case 1) and new (Case 3) budget lines/point of optimality.Please answer and explain case 3 and draw draw old (Case 1) and new (Case 3) budget lines/point of optimality.arrow_forward
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