3. Finding the optimal combination of two goods - $2. Suppose that Larry buys Larry enjoys consuming both cheese and fruit. Each pound of cheese costs Pc = $1, and each pound of fruit costs PF 300 pounds of cheese and 200 pounds of fruit per year. The following graphs show his marginal utility curves for cheese and fruit. At his current consumption level, Larry's marginal utility from consuming the last pound of cheese he bought is MUC S 30 utils per pound, and his marginal utility from consuming the last pound of fruit he bought is MUF = 30 utils per pound. 60 40 30 IL 20 10 400 500 600 50 40 A 30 B C D 20 10 0 0 100 Is Larry currently maximizing his utility? Combination 200 300 CHEESE (Pounds per year) 300, 30 (Pounds per Year) 200 400 300 No; he could buy less cheese and more fruit, not spend any more money, and be better off. O No; he likes fruit and cheese more than other goods, so he should buy more of both. O No; he could buy more cheese and less fruit, not spend any more money, and be better off. O Yes; the marginal utility he receives from his last pound of cheese equals that of his last pound of fruit. Cheese 500 For each of the following combinations of cheese and fruit, calculate the marginal utility per dollar from the last pound of cheese and the last pound of fruit. Then, use the dropdown menus in the last column to indicate which of the combinations satisfy the condition for consumer equilibrium. MUC Po 60 100 50 200 0 300 400 0 Fruit (Pounds per Year) 100 200, 30 200 300 400 FRUIT (Pounds per year) 500 MUF PF 600 Consumer Equilibrium? False v Suppose Larry has an "appetizer budget" of $1,355 per year, which he spends on cheese and fruit. To maximize his utility, Larry will purchase pounds of cheese and pounds of fruit per year.
3. Finding the optimal combination of two goods - $2. Suppose that Larry buys Larry enjoys consuming both cheese and fruit. Each pound of cheese costs Pc = $1, and each pound of fruit costs PF 300 pounds of cheese and 200 pounds of fruit per year. The following graphs show his marginal utility curves for cheese and fruit. At his current consumption level, Larry's marginal utility from consuming the last pound of cheese he bought is MUC S 30 utils per pound, and his marginal utility from consuming the last pound of fruit he bought is MUF = 30 utils per pound. 60 40 30 IL 20 10 400 500 600 50 40 A 30 B C D 20 10 0 0 100 Is Larry currently maximizing his utility? Combination 200 300 CHEESE (Pounds per year) 300, 30 (Pounds per Year) 200 400 300 No; he could buy less cheese and more fruit, not spend any more money, and be better off. O No; he likes fruit and cheese more than other goods, so he should buy more of both. O No; he could buy more cheese and less fruit, not spend any more money, and be better off. O Yes; the marginal utility he receives from his last pound of cheese equals that of his last pound of fruit. Cheese 500 For each of the following combinations of cheese and fruit, calculate the marginal utility per dollar from the last pound of cheese and the last pound of fruit. Then, use the dropdown menus in the last column to indicate which of the combinations satisfy the condition for consumer equilibrium. MUC Po 60 100 50 200 0 300 400 0 Fruit (Pounds per Year) 100 200, 30 200 300 400 FRUIT (Pounds per year) 500 MUF PF 600 Consumer Equilibrium? False v Suppose Larry has an "appetizer budget" of $1,355 per year, which he spends on cheese and fruit. To maximize his utility, Larry will purchase pounds of cheese and pounds of fruit per year.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. Finding the optimal combination of two goods
-
$2. Suppose that Larry buys
Larry enjoys consuming both cheese and fruit. Each pound of cheese costs Pc = $1, and each pound of fruit costs PF
300 pounds of cheese and 200 pounds of fruit per year. The following graphs show his marginal utility curves for cheese and fruit. At his current
consumption level, Larry's marginal utility from consuming the last pound of cheese he bought is MUC S 30 utils per pound, and his marginal utility
from consuming the last pound of fruit he bought is MUF = 30 utils per pound.
60
40
30
IL
20
10
400 500
600
50
40
A
30
B
C
D
20
10
0
0
100
Is Larry currently maximizing his utility?
Combination
200
300
CHEESE (Pounds per year)
300, 30
(Pounds per Year)
200
400
300
No; he could buy less cheese and more fruit, not spend any more money, and be better off.
O No; he likes fruit and cheese more than other goods, so he should buy more of both.
O No; he could buy more cheese and less fruit, not spend any more money, and be better off.
O Yes; the marginal utility he receives from his last pound of cheese equals that of his last pound of fruit.
Cheese
500
For each of the following combinations of cheese and fruit, calculate the marginal utility per dollar from the last pound of cheese and the last pound of
fruit. Then, use the dropdown menus in the last column to indicate which of the combinations satisfy the condition for consumer equilibrium.
MUC
Po
60
100
50
200
0
300
400
0
Fruit
(Pounds per Year)
100
200, 30
200
300 400
FRUIT (Pounds per year)
500
MUF
PF
600
Consumer Equilibrium?
False v
Suppose Larry has an "appetizer budget" of $1,355 per year, which he spends on cheese and fruit. To maximize his utility, Larry will purchase
pounds of cheese and
pounds of fruit per year.
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