Allen has a utility function U=xy², where x is the consumption of apples and y is theconsumption of bananas. Price of apple is 1 and price of bananas is 4. Allen has 30 dollars in hispocket, so how many apples and bananas will he purchase to maximize his utility?options:10 apples and 5 bananas.3 apples and 10 bananas.30 apples only.none of above.

Budget Constraint: Allen has a budget of $30. Let x be the number of apples and y be the number of…

Answered: Allen has a utility function U=xy²,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Revealed Preference is when an individual's behavior reveals information about a person's tastes and preferences,i.e. what he likes and dislikes and how much he likes or dislikes a good. The individual demand schedule and an individual's demand curve reveals a person's tastes and preferences for a good. Specifically it reveals how much each successive unit of the good he consumes is worth to him. We can say this differently by saying the maximum price a person is willing to pay for a particular unit of the good is how much that unit of the good is worth to him. This value is revealed by his behavior or his willingness to voluntarily give a certain amount of money in exchange for that unit of the good. In other words, how many units of a good a person demands/buys at any given price. Look at the images below. multiple choices can be correct. which answers are correct? look at graph.
Positive marginal utility is when the marginal utility increases the total utility whereas negative marginal utility is when the consumption of an additional unit reduces the amount of the total utility. Is it true or false?
13. Shawn likes to consume pineapple smoothies and hotdogs. His preferences are represented by the utility function U(x,y) = 34x - x²/2 + y where x is his consumption of pineapple smoothies and y is his consumption of hotdogs. The price of pineapple smoothies is $2 and the price of hotdogs is $1. If the price of pineapple smoothies increases to $6, the change in Shawn's consumer surplus is: A) -144 B) -128 C) -120 D) -112 E) -90
Kate’s utility function includes coffee (c) and sugar (s). She only consumes coffee and sugar together, and she only consumes in the ratio of one unit (cup) of coffee with two units (spoons) of sugar. Her utility function is What is her marginal utility of sugar if she has 4 cups of coffee and 6 spoons of sugar? Remember that unit are infinitely divisible (you can have parts of units). (a) 0 (b) 1 (c) ½ (d) 2
If marginal utility is declining but still positive, total utility is increasing. True or false and explain
In Workout problem 5.1, Charlie has a utility function U(xA, xB) = xAxB, the price of apples is $1, and the price of bananas is $2. If Charlie's income were $160, how many units of bananas would he consume if he chose the bundle that maximized his utility subject to his budget constraint?
You consume music (M) and concert tickets (C). Your utility function is U(M, C) = M1/4C3/4. The marginal utility for concert tickets, MUC is MUC =3/4C-1/2M1/4 and the marginal utility for music, MUM is MUm = 1/4C3/4M-3/4 (a) Calculate MRSMC using only the given marginal utilities. (b) Solve for the utility of bundle A where M = 16 and C = 16. Solve for your utility at bundle B where M = 128 and C = 8. Are the utilities the same? (c) Calculate MRSMC at bundle A and at bundle B. Are they the same? (d) Are your indifference curves convex? Draw the ICs. Make sure to label the quantities of the consumption bundles, the axis, and the MRS at those bundles.
If at a quantity consumed of 1 unit, total utility equals 25 and marginal utility equals 25, and at a quantity consumed of 2 units, total utility is unknown and marginal utility is 20, and at a quantity consumed of 3 units, total utility is 57 and marginal utility is unknown, what is marginal utility of the third unit?
Suppose you go to Trader Joe's to buy fruit for the week. You only like apples (A) and bananas (B) and your weekly fruit budget is $11. When you arrive at Trader Joe's you notice that the price of an apple is $1.00 and the price of a banana is $0.25. QUESTION #1: How many apples and bananas should you buy? QUESTION #2: When you have found the answer, draw a diagram that shows the outcome. Step #1. Determine your preferences. Let's suppose that your preferences can be represented by the following utility function: U(A, B) = AªBß = A0.40 B0.60 FYI: This utility function is known as a Cobb-Douglas utility function. It is the most commonly used function used in economics! The reason we like it so much is that it has: 1. Constant returns (double your consumption of A and B and your utility doubles); a + B = 1 2. Diminishing marginal utility (the extra utility gained from consuming A (or B) decreases as you consume more of the A good (or B good); a 0.40); B > a. Step #2: Determine your…
Assume that the price of oranges is $2 and the price of starfruit is $1. You have $10 of income to spend on both goods, and you intend to spend the entire amount. Note that MU stands for marginal utility. Q of oranges MU from oranges Q of starfruit MU of starfruit 1 $20 1 $12 2 16 2 10 3 12 3 8 4 8 4 6 5 4 5 4 6 0 6 2 To maximize total utility, you would consume _____ oranges and _____ starfruit. Question 25…
The price of goods A and B are 20 and 10 respectively. given that the marginal utility of commodity A is 10. what is the marginal utility of B if the consumer is at equilibrium.
Suppose Carlos has to choose between purchasing jewelry and water. Which of the following is the utility-maximizing rule that Carlos should follow while choosing the optimal quantities of these two goods? (Note: In the answer options that follow, MU stands for "marginal utility.") O (MU of Water) x (Price of Water) = (MU of Jewelry) x (Price of Jewelry) O MU of Water = MU of Jewelry MU of Jewelry %3D Price of Water MU of Water Price of Jewelry MU of Jewelry Price of Jewelry MU of Water %3D Price of Water Since water costs little and jewelry is expensive, it must follow that when people choose their optimal quantities of water and jewelry to purchase, the marginal utility they receive from the last piece of jewelry they buy is than the marginal utility they receive from the last gallon of water they buy.

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