MICROECONOMICS (LL)(FD)
21st Edition
ISBN: 9781260191806
Author: McConnell
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 7.A, Problem 3AP
To determine
The indifference curve and total utility.
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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.
John’s preferences for Orange (O) and lemons (L) are represented by the funtion U(O, L)= O+2L. The oranges cost £2 and the lemons £1. Given that John’s monthly income is £30 answer the following questions:
What type of goods are oranges and lemons for John?
What is the proportion to which John is willing to exchange Oranges for Lemons?
Illustrate and solve graphically John’s utility maximization problem.
If his income increases every month by £10, how will John’s consumption choice be affected? Illustrate graphically the income expansion path and the Engel curve for each good.
How will an increase in the price of Lemons to £6 affect John’s optimal consumption choice? (John’s income is £30)
Graph John’s demand curve for each good.
Assume that John wins a voucher of £20, redeemable only in Oranges. How would this affect John’s utility? (Assume that prices and income are as described initially)
Assume that John is presented with two options: an Orange voucher of £20 or just £6 to spend…
True 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.
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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