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7. MRS and utility maximization Cho lives in Miami and loves to eat desserts. She spends her entire weekly allowance on pudding and pie. A bowl of pudding is priced at $1.50, and a piece of pumpkin pie is priced at $4.50. At her current consumption point, Cho's marginal rate of substitution (MRS) of pudding for pie is 5. This means that Cho is willing to trade five bowls of pudding per week for one piece of pie per week. Does Cho's current bundle maximize her utility-in other words, make her as well off as possible? If not, how should she change it to maximize her utility? Cho could increase her utility by buying less pudding and more pie per week. O Cho's current bundle maximizes her utility, and she should keep it unchanged. Cho could increase her utility by buying more pudding and less pie per week.

7. MRS and utility maximization Cho lives in Miami and loves to eat desserts. She spends her entire weekly allowance on pudding and pie. A bowl of pudding is priced at $1.50, and a piece of pumpkin pie is priced at $4.50. At her current consumption point, Cho's marginal rate of substitution (MRS) of pudding for pie is 5. This means that Cho is willing to trade five bowls of pudding per week for one piece of pie per week. Does Cho's current bundle maximize her utility-in other words, make her as well off as possible? If not, how should she change it to maximize her utility? Cho could increase her utility by buying less pudding and more pie per week. O Cho's current bundle maximizes her utility, and she should keep it unchanged. Cho could increase her utility by buying more pudding and less pie per week.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Cho lives in Miami and loves to eat desserts. She spends her entire weekly allowance on pudding and pie. A bowl of pudding is priced at $1.50, and a piece of pumpkin pie is priced at $4.50. At her current consumption point, Cho's marginal rate of substitution (MRS) of pudding for pie is 5. This means that Cho is willing to trade five bowls of pudding per week for one piece of pie per week.

 

 

7. MRS and utility maximization Cho lives in Miami and loves to eat desserts. She spends her entire weekly allowance on pudding and pie. A bowl of pudding is priced at $1.50, and a piece pumpkin pie is priced at $4.50. At her current consumption point, Cho's marginal rate of substitution (MRS) of pudding for pie is 5. This means that Cho is willing to trade five bowls of pudding per week for one piece of pie per week. Does Cho's current bundle maximize her utility-in other words, make her as well off as possible? If not, how should she change it to maximize her utility? O Cho could increase her utility by buying less pudding and more pie per week. O Cho's current bundle maximizes her utility, and she should keep it unchanged. O Cho could increase her utility by buying more pudding and less pie per week.
Transcribed Image Text:7. MRS and utility maximization Cho lives in Miami and loves to eat desserts. She spends her entire weekly allowance on pudding and pie. A bowl of pudding is priced at $1.50, and a piece pumpkin pie is priced at $4.50. At her current consumption point, Cho's marginal rate of substitution (MRS) of pudding for pie is 5. This means that Cho is willing to trade five bowls of pudding per week for one piece of pie per week. Does Cho's current bundle maximize her utility-in other words, make her as well off as possible? If not, how should she change it to maximize her utility? O Cho could increase her utility by buying less pudding and more pie per week. O Cho's current bundle maximizes her utility, and she should keep it unchanged. O Cho could increase her utility by buying more pudding and less pie per week.
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