4. On Thursday nights, Hacienda Pizza Co. has a pasta special. Jacob likes the restaurant's pasta,and his willingness to pay for each serving is shown in the accompanying table:Willingness to pay for pasta (perserving)$10Quantity of Pasta (servings)1$83$64$4$26.$Oa. If the price of a serving of pasta is $5, how many servings will Jacob buy? How muchconsumer surplus does he receive?b. The following week, Jacob is back, but now the price of a serving is $6. By how much does hisconsumer decrease compared to the first week?c. One week later, he goes to the restaurant again. He discovers that the restaurant is offering an"all you can eat" special for $25. How much pasta will Jacob eat, and how much consumersurplus does he receive now?d. Suppose you own Hacienda Pizza Co and Jacob is a "typical" customer. What is the highestprice you can charge for the “all you can eať" special and still attract customers?

The equilbrium price and quantity of a good sold in the market are determined by the forces of…

Answered: 4. On Thursday nights, Hacienda Pizza…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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70- 60- B 50- 40- 30- Suppose Naomi consumes two goods: good 1 and good 2. Last year, the price of good 1 was $2.00 and the price of good 2 was $3.20. Given these prices, Naomi maximized satisfaction consuming bundle A, as indicated in the figure to the right. However, this year, the price of good 1 has increased to $6.00 and the price of good 2 has changed to $2.40. Given these prices, Naomi would be equally well off at consumption bundle B. Calculate a Laspeyres cost-of-living index for Naomi using 100 as the base for last year. In particular, the Laspeyres index for this year is ☐. (Enter your response rounded to two decimal places.) The Laspeyres index suggests inflation has been percent over the year. (Enter your response rounded to two decimal places.) The Laspeyres cost-of-living index overstates the rate of inflation because it assumes that consumers do not alter their consumption patterns as prices change. Naomi's true cost-of-living increase has been ☐ percent. (Enter your…
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4. Liam initially has a weekly allowance of €24 to spend on eggs (at €0.40 per egg) and beans (at €0.80 per tin). Liam will only consume 4 eggs with each tin of beans and never changes this proportion. (a) What is the utility maximising amount of eggs and beans that Liam buys each week? (b) Suppose the price of eggs rise to €0.60 per egg but the price of beans falls to €0.60 per tin. At the same time, Liam's weekly allowance rises to €30. How much of each good will Liam now buy? Compare your answer to that in (a) and explain the difference, if there is one. Use a diagram to complement your answer.
36
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