7. MRS and utility maximization Suppose your classmate Dina loves to eat dessert-so much so that she allocates her entire weekly budget to apple crisp and pie. The price of one bowl of apple crisp is $1.00, and the price of a piece of blueberry pie is $4.00. At her current level of consumption, Dina's marginal rate of substitution (MRS) of apple crisp for pie is 4. In other words, Dina is willing to sacrifice four bowls of apple crisp for one piece of pie per week. Does Dina's current consumption bundle maximize her utility? That is, does it make her as well off as possible? If not, how should she change it to maximize her utility? O Dina's current bundle maximizes her utility, and she should keep it unchanged. O Dina could increase her utility by buying more apple crisp and less pie per week. Dina could increase her utility by buying less apple crisp and more pie per week.

7. MRS and utility maximization Suppose your classmate Dina loves to eat dessert-so much so that she allocates her entire weekly budget to apple crisp and pie. The price of one bowl of apple crisp is $1.00, and the price of a piece of blueberry pie is $4.00. At her current level of consumption, Dina's marginal rate of substitution (MRS) of apple crisp for pie is 4. In other words, Dina is willing to sacrifice four bowls of apple crisp for one piece of pie per week. Does Dina's current consumption bundle maximize her utility? That is, does it make her as well off as possible? If not, how should she change it to maximize her utility? O Dina's current bundle maximizes her utility, and she should keep it unchanged. O Dina could increase her utility by buying more apple crisp and less pie per week. Dina could increase her utility by buying less apple crisp and more pie per week.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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