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

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 2SCQ: Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to...

See similar textbooks

Similar questions

Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a roundâ€”trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.
Is it possible for total utility to increase while marginal utility diminishes? Explain.
Would you expect total utility to rise or fall with additional consumption of a good? Why?
If people do not have a complete mental picture of total utility for every level of consumption, how can they find their utility-maximizing consumption choice?
Who determines how much utility an individual will receive from consuming a good?
What is the rule relating the ratio of marginal utility to prices of two goods at the optimal choice? Explain why, if this rule does not hold, the choice cannot be utility-maximizing
Praxilla, who lived in ancient Greece, derives utility from reading poems and from eating cucumbers. Praxilla gets 30 units of marginal utility from her first poem 27 units of marginal utility from her second poem 24 units of marginal utility from her third poem, and so on, with marginal utility declining by three units for each additional poem. Praxilla gets six units of marginal utility for each of her next three cucumbers consumed, five units of marginal utility for each of her next three cucumbers consumed, four units of marginal utility for each of the following three cucumbers consumed, and so on, with marginal utility declining by one for every three cucumber consumed. A poem costs three bronze coins hut a cucumber costs only one bronze coin. Praxilla has 18 bronze coins. Sketch Praxillas budget set between poems and cucumbers, placing poems on the vertical axis and cucumbers on the horizontal axis. Start off with the choice of zero poems and 18 cucumbers, and calculate the changes in marginal utility of moving along the budget line to the next choice of one poem and 15 cucumbers. Using this step-by-step process based on marginal utility, create a table and identify Praxillas utilityâ€”maximizing choice. Compare the marginal utility of the two goods and the relative prices at the optimal choice to see if the expected relationship holds. Hint: Label the table columns: 1) Choice, 2} Marginal Gain from More Poems, 3) Marginal Loss from Fewer Cucumbers, 4) Overall Gain or Loss, 5) Is the previous choice Optimal? Label the table rows: 1) 0 Poems and 18 Cucumbers, 2) 1 Poem and 15 cucumbers, 3) 2 Poems and 12 cucumbers, 4) 3 Poems and 9 Cucumbers, 5) 4 Poems and 6 cucumbers 6) 5 Poems and 3 Cucumbers, 7) 6 Poems and 0 Cucumbers.
As a college student you work at a part-time job, but your parents also send you a monthly allowance. Suppose one month your parents forgot to send the check. Show graphically how your budget constraint is affected. Assuming you only buy normal goods, what would happen to your purchases of goods?