4. A consumer uses all her available income to buy food and gasoline. Her indifference curveand budget constraint are shown in the diagram below. At point A, the marginal utility perdollar spent on food isthe marginal utility per dollar spent on gasoline.gasolineAICfooda. greater thanb. less thanc. equal to5. Megan is currently spending her entire candy budget. According to her preferences, youcould take away up to 5 candy bars if you give her 3 bags of sour patch kids withoutchanging her utility. The price of a candy bar is $0.75 and the price of a bag of sour patchkids is $1.50. Is Megan maximizing her utility? If not, how should she change herconsumption bundle?a. No, she should buy more candy bars and fewer bags of sour patch kids.b. No, she should buy more bags of sour patch kids and fewer candy bars.c. No, she should buy more bags of sour patch kids and more candy bars.d. No, she should buy fewer bags of sour patch kids and fewer candy bars.e. Yes, she is maximizing her utility.

Answer 4 OPTION C - EQUAL TO CONSUMER MAXIMIZE UTILITY when indifference curve tangent to budget. At…

4. A consumer uses all her available income to buy food and gasoline. Her indifference curve and budget constraint are shown in the diagram below. At point A, the marginal utility per dollar spent on food is the marginal utility per dollar spent on gasoline. soline IC

4. A consumer uses all her available income to buy food and gasoline. Her indifference curve and budget constraint are shown in the diagram below. At point A, the marginal utility per dollar spent on food is the marginal utility per dollar spent on gasoline. soline IC

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 8P

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26. Danny has $12 to spend on two goods: pies and soda. The price of a pie is $4, and the price of a can of soda is $2. To maximize his utility, Danny buys A) the combination that gives him equal total utility from pies and soda B) 2 pies and 2 cans of soda C) oniy sodas because they are iess expensive D) the combination that gives him the same marginai utility per doillar spent on pies as on soda
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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,…
Five consumers have the following marginal utility ofapples and pears:Marginal Utilityof ApplesMarginal Utilityof PearsClaire 6 12Phil 6 6Haley 6 3Alex 3 6Luke 3 12The price of an apple is $1, and the price of a pear is$2. Which, if any, of these consumers are optimizingtheir choices of fruit? For those who are not, howshould they change their spending?
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7. Bob receives utility from days spent traveling on vacation domestically (D) and daysspent traveling in a foreign country (F) as given by the utilityU(D; F) = DFThe price of a day spent traveling domestically is 160 pounds and in a foreigncountry 200 pounds. Bobís annual budget for traveling is 8000 pounds. (a) Find Bobís utility maximising choice of days traveling domestically and of daystravelling in a foreign country. Find also his utility level from consuming thatbundle. Suppose that the price of domestic traveling increases to 250 pounds per day.Denoting his budget for traveling x, (suppose by now that it is unknown) findthe demand for D and F under the new prices as a function of x.
1. A consumer has an income of $3024 to spend each day. The only two goods the consumer is interested in purchasing are goods A and B. The marginal-utility schedules for these two goods are shown in the table below. The price of B does not change and is $378. The marginal utility per dollar from B is also shown in the table. But the price of A varies as shown in the table. The marginal utility per dollar from A when the price of A is $1512 and $756 is shown in the following table. Good A Good B Quantity MU MU/$1512 MU/$756 MU MU/$378 1 24 2 15 3 12 4 8 5 6 6 4 48 32 24 16 8 4 ||||| ||||| |||
Bill gets 100 utils from eating one candy bar per day. He gets 120 utils from eating two candy bars per day. Calculate the marginal utility. O. 220 utils 100 utils 120 utils 20 utils Tamera calculates her utility for two hours of studying each day to be 300 utils. Her total utility for three hours is also 300 utils. Calculate the marginal utility. 300 utils 600 utils O 150 utils no marginal utility
A consumer is making purchases of products Alpha and Beta such that the marginal utility of product Alpha is 63 and the marginal utility of product Beta is 40. The price of product Alpha is $9, and the price of product Beta is $5. The utility-maximizing rule suggests that, to stay within a given budget constraint, this consumer should Multiple Choice O O O increase consumption of product Beta and increase consumption of product Alpha. make no change in the consumption of Alpha or Beta. increase consumption of product Beta and decrease consumption of product Alpha. increase consumption of product Alpha and decrease consumption of product Beta.
1. An individual's budget Suppose Darnell has a weekly budget of $32 to spend on ranch dressing and spinach. Ranch dressing is priced at $4 per bottle, and spinach is priced at $2 per container. If Darnell spends his entire $32 on ranch dressing, he can buy 16 containers of spinach. 8 bottles of ranch dressing. If he spends his entire $32 on spinach, he can buy Use the blue line (circle symbol) to plot Darnell's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of ranch dressing and spinach that are affordable for Darnell. Finally, place the black point (plus symbol) on the point on Darnell's budget constraint that corresponds to a scenario in which Darnell spends $16 on each good. Note: Dashed drop lines will automatically extend to both axes.
John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke, or does he show increasing marginal utility for Coke? Supposethat John has $3 in his pocket. If Cokes cost $1 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too? What about the third dollar? If John’s marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke?