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.
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 8P
Related questions
Question

Transcribed Image Text: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 ple. 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?
Dina's current bundle maximizes her utility, and she should keep it unchanged.
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.
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 1 images

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you

Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc


Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc



Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
