MICROECONOMICS (LL)(FD)
21st Edition
ISBN: 9781260191806
Author: McConnell
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 7, Problem 8DQ
To determine
Fair bet and less-than-fair bet.
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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
Title
Suppose that Lynn enjoys coconut oil in her coffee. She has very particular preferences, and she mus
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Suppose that Lynn enjoys coconut oil in her coffee. She has very particular preferences, and she must have exactly two spoonfuls of coconut oil for each cup of coffee. Let C be the number of cups of coffee, and O be the number of spoonfuls of coconut oil. Also, let PC be the price of a cup of coffee. Suppose Lynn has $12 to spend on coffee and coconut oil. Also, the price of coconut oil is $.50 per spoonful.a) Graph Lynnâs Price Consumption Curve for prices, PC = $1, PC = $2, and PC = $3. Please put the number of cups of coffee on the horizontal axis, and the number of spoonfuls of coconut oil on the vertical axis. Be sure to label your graph carefully and accurately.b) Graph Lynnâs demand curve for coffee. You may assume that both coconut oil and coffee are continuous variables so she can consume any amount of coffee and coconut oil that she could afford.…
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.
Chapter 7 Solutions
MICROECONOMICS (LL)(FD)
Ch. 7.1 - Prob. 1QQCh. 7.1 - Prob. 2QQCh. 7.1 - Prob. 3QQCh. 7.1 - Prob. 4QQCh. 7.A - Prob. 1ADQCh. 7.A - Prob. 2ADQCh. 7.A - Prob. 3ADQCh. 7.A - Prob. 1ARQCh. 7.A - Prob. 2ARQCh. 7.A - Prob. 1AP
Ch. 7.A - Prob. 2APCh. 7.A - Prob. 3APCh. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQCh. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7P
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- 4. Suppose a person has $8 to spend only on apples and bananas. Apples 1 cost $0:4 each, and bananas cost $0:1 each. Furthermore, his preferences for apples (A) and bananas (B) can be represented by U = pAB. a) If A = 5 and B = 80, what will utility be?b) If A = 10, what value of for B will provide the same utility in part a? c) If A = 20, what value of for B will provide the same utility in parts a and b?d) Graph the indi§erence curve implied by parts a through c.e) Give the budget constraint, which of the points identiÖed in parts a through c can be bought by this person?f) show through some examples that every other way of allocating income provides less utility than does the point identiÖed in part b. graph this utility maximizing situation.arrow_forward17 - Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $2.00 and the price of a banana is $1.00. If the consumer spent all of her budget on just apples or just bananas, how many apples or bananas maximum would she be able to buy?arrow_forward27. If you have Marginal utility of 2 with a Total utility equals to 56, then when marginal utility is reduce to zero while Total utility remains the same, what does it mean? a. at 56 utils of MU equals zero, utility begins to gain momentum b. at 56 utils of MU equals zero, utility begins to diminish c. at 56 utils of MU equals zero. utility begins to increase d. at 56 utils of MU equals zero, utility begins to upswingarrow_forward
- 5. A consumer buys only two goods, X and Y. No other goods exist and there is no possibility of saving. The marginal utility of X is independent of the quantity of Y consumed, and the marginal utility of Y is independent of the quantity of X consumed. MUX is constant no matter how he consumes, but MUY falls as consumption increases. In the initial equilibrium he consumes one of each good. How much can you infer about the following:a.) The slope of the indifference curveb.) The curvature of the indifference curvec.) Whether the marginal utility of money is constant, rising, or falling as money income increases.d.) the income elasticity of demand for Ye.) The price elasticity of demand for X.arrow_forwardTrue or false with reasoning: 1) _______When we claim that utility can be ordinally measured, we assume that the consumer is able to measure the total and marginal utility received when one extra unit of a commodity is consumed. 2)_______If MRS between two goods is constant, then having more of one good without having more of the other does not increase utility. 3)_______Marginal Utility increases until total utility is at a maximum and then marginal utility decreases.arrow_forward1-Which of the following provides a higher marginal utility, a diamond or a pint of water? A dimond A point of water They prodive about the same marginal utility 2- Unit of Apples MU of Apple Unit of Oranges MU of Oranges 1st 4 1st 9 2nd 3 2nd 3 3rd 1 3rd 2 4th 0 4th 0 Suppose the price of an apple is $2, and the price of an orange if $3. You have a budget $10 for these two items. What would you put in your basket first? an Apple an Orange You are indifferent between putting an apple or an orange in your basket. We do not have enough information to answer this question.arrow_forward
- 12)Suppose a consumer has $100 to spend on two goods, shoes and shirts. If the price of a pair of shoes is $20 per pair and the price of a shirt is $15 each, which of the following combinations is unaffordable to the consumer? A) 0 pairs of shoes and 0 shirts B) 2 pairs of shoes and 4 shirts C) 5 pairs of shoes and 0 shirts D) 0 pairs of shoes and 7 shirts E) 2 pairs of shoes and 3 shirtsarrow_forward4 Assume that a person's utility over two goods is given by U(g1; g2) = g1 + ln g2. The price of good g1 is equal to p1 and the price of good g2 is p2. The total income of the individual is given by I. The marginal rate of substitution between g1 and g2 is given by 1/(1/g2). Then, the expressions for this person's (1) budget constraint, (2) budget line's slope (assume that, graphically, g1 is on the horizontal axis and g2 on the vertical axis), and (3) the person's demand function for g2 (that is, g2 as a function of price ratio) are respectively:arrow_forwardSuppose that Omar’s marginal utility for cups of coffee is constant at 5.5 utils per cup no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 11 for the first doughnut he eats, 10 for the second he eats, 9 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?arrow_forward
- Columns 1 through 4 in the following table show the marginal utility, measured in utils, that Ricardo would get by purchasing various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the prices of A, B, C, and D are, respectively, $18, $6, $4, and $24 and that Ricardo has an income of $106. a. What quantities of A, B, C, and D will Ricardo purchase in maximizing his utility? b. How many dollars will Ricardo choose to save? c. Check your answers by substituting them into the algebraic statement of the utility-maximizing rule.arrow_forwardLet the following table represents the total utility of a given consumer, in the cardinal utility approach. Q 1 2 3 4 5 Tux 8 14 18 20 20 Tuy 6 10 13 15 16 Mux Muy Mux/px Muy/py D) Assuming the consumer has any amount of money (enough budget) how many of X and Y should the consumer buy, to maximize utility? E) What is the total utility of X and Y? F) Let now price of X is 4 birr per unit and price of Y is 2 birr per unit and budget of the consumer for consumption of X and Y is 20 birr. Given budget constraint how many of X and Y should the consumer buy to maximize utility? G) What are the total utility of X and Yarrow_forward3. Suppose Mary enjoys Pepsi and Coke according to the functionU(P;C) = 4C + 5P. What does her utility function say about her MRS of Coke for Pepsi? What do her indi§erence curves look like? What type of goods are Pepsi and Coke for Mary? If Pepsi and Coke each cost $1 and Mary has $20 to spend on these products, how many units of each product should she buy in order to maximize her utility? Show this utility maximiz- ing combination combination of Pepsi and Coke on the graph. how would her consumption and utility maximizing bundle of Coke and Pepsi change if the price of Coke decreases to 50 cents. 4. Vera is an impoverished graduate student who has only $100 a month to spend on food. She has read in a government publication that she can assure an adequate diet by eating only peanut butter and carrots in the Öxed ratio of 2 pounds of peanut butter to 1 pound of carrots, so she decides to limit her diet to that regime. a) If peanut butter costs $4 per pound and carrots cost $2 per…arrow_forward
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