close solutoin list

(Utility Maximization) The following tables illustrate Eileen’s utilities from watching first-run movies in a theater and from renting movies online. Suppose that she has a monthly movie budget of $36, each movie ticket costs $6, and each video rental costs $3. Movies in a Theater Q TU MU MU/P 0 0 _____ _____ 1 200 _____ _____ 2 290 _____ _____ 3 370 _____ _____ 4 440 _____ _____ 5 500 _____ _____ 6 550 _____ _____ 7 590 _____ _____ Online Movies Q TU MU MU/P 0 0 _____ _____ 1 250 _____ _____ 2 295 _____ _____ 3 335 _____ _____ 4 370 _____ _____ 5 400 _____ _____ 6 425 _____ _____ a. Complete the tables. b. Do these tables show that Eileen’s preferences obey the law of diminishing marginal utility? Explain your answer. c. How much of each good does Eileen consume in equilibrium? d. Suppose the prices of both types of movies drop to $1 while Eileen’s movie budget shrinks to Sb. Now much of each good does she consume in equilibrium?

BuyFind

ECON MICRO

5th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781337000536
BuyFind

ECON MICRO

5th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781337000536

Solutions

Chapter
Section
Chapter 6, Problem 2.4P
Textbook Problem

(Utility Maximization) The following tables illustrate Eileen’s utilities from watching first-run movies in a theater and from renting movies online. Suppose that she has a monthly movie budget of $36, each movie ticket costs $6, and each video rental costs $3.

Movies in a Theater

Q TU MU MU/P
0 0 _____ _____
1 200 _____ _____
2 290 _____ _____
3 370 _____ _____
4 440 _____ _____
5 500 _____ _____
6 550 _____ _____
7 590 _____ _____

Online Movies

Q TU MU MU/P
0 0 _____ _____
1 250 _____ _____
2 295 _____ _____
3 335 _____ _____
4 370 _____ _____
5 400 _____ _____
6 425 _____ _____

a. Complete the tables.

b. Do these tables show that Eileen’s preferences obey the law of diminishing marginal utility? Explain your answer.

c. How much of each good does Eileen consume in equilibrium?

d. Suppose the prices of both types of movies drop to $1 while Eileen’s movie budget shrinks to Sb. Now much of each good does she consume in equilibrium?

Expert Solution

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

See Solution

*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions
Describe business marketing

MKTG 12:STUDENT ED.-TEXT

RATIO CALCULATIONS Assume the following relationships for the Brauer Corp.: Sales/Total assets 1.5x Return on a...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)