11. (Originally #7 on Homework #3) Consider a consumer with the following information: At the optimal consumption bundle this consumer consumes 3 boxes of apples and 3 boxes of oranges. If the Marginal Rate of Substitution of Apples for Oranges is 6 at the optimal consumption bundle (MRSA0=6), and the price of a box of Oranges is $1.80, what is the price of a box of Apples? Show how you found your answer.

11. (Originally #7 on Homework #3) Consider a consumer with the following information: At the optimal consumption bundle this consumer consumes 3 boxes of apples and 3 boxes of oranges. If the Marginal Rate of Substitution of Apples for Oranges is 6 at the optimal consumption bundle (MRSA0=6), and the price of a box of Oranges is $1.80, what is the price of a box of Apples? Show how you found your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Suppose you consume two goods: x and y. Your marginal utility of x is 20 and your marginal utility of y is 24 at your utility-maximizing combination. The current price of x is $5. (a) What is the marginal rate of substitution at your utility-maximizing combination? (b) What is the price of y at your utility-maximizing combination?
(Table: Marginal Utility per Dollar of Twix) Use Table: Marginal Utility per Dollar of Twix. The price of Twix is $2 per bar. If the price of Twix increases to $3 per bar, the marginal utility per dollar for each bar of Twix will: Table: Marginal Utility per Dollar of Twix Bars Quantity of Twix bars Total utility 10 0 1 6 2 10 3 13 15 16 5 O remain constant. O increase O decrease. O fluctuate randomly.
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2. Income and substitution effects Manuel is an accountant who enjoys apples and pears. Suppose that the price of apples increases. As a result, even though Manuel purchases fewer apples, he actually purchases more pears than he would have before the price change. This phenomenon is known as the effect.
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Which budget constraint panel in Figure below shows the combined effects of an increase in the price of oranges and a decrease in the price of apples? (e) (c) Oranges (a) (b) (d) Oranges Oranges Oranges Oranges Apples Apples Apples Apples Apples O panel a panel b panel c O panel e O none of the above
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