Caroline has a $10 dessert budget that she uses to buy pie and cake. Assume the price of pie (Pp) is fixed at $2. Table A shows Caroline's marginalMUutility (MU) and marginal utility per dollar () she receives from the first through fifth slices of pie she buys each week. Table B shows the sameinformation for cake when the price of a slice of cake (Pc) is either $4 or $2. Assume that Caroline isrational consumer who wants to maximize herutility.Table AMU/P(If P=2)PieMU(Slices)(Utils)3015124122010147Table BCakeMUMU/P(Slices)(Utils)(If P=$4)(If P=$2)40102032816224121648412.964.4 51. If the price of a slice of cake is $4, the price of a slice of pie is $2, and Caroline spends her entire budget of $10, she will choose to buyof pie andof cake.Now, suppose that cake goes on sale, and its price decreases to $2. Caroline's utility is now maximized if she buysof pie andof cake.Suppose the price of pie is fixed at $2, and Caroline's budget is fixed at $10.On the graph, use the blue line (circle symbols) to plot Caroline's demand for cake. Do this by placing one blue point (circle symbol) on Caroline'sdemand for cake when the price is $4 and the second blue point on Caroline's demand for cake when the price is $2.Caroline's DemandPRICE (Dollars per slice)4)

If the price of the slice of cake is $4....., she will choose to buy 3 slices of pie and 1 slice of…

Answered: Caroline has a $10 dessert budget that…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose a consumer has the following utility function: U(x1,x2) = alnx1 + (1-a)lnx2. The price of good 1 is $10 and the price of good 2 is $20 and the consumer’s income is $500. Find the quantities of x1 and x2 that will maximize utility if a=1/2.
A consumer is choosing between two consumption points: point A contains 2 eggs and 2 pieces of bacon and point B contains 2 eggs and 3 pieces of bacon. Which of the following is true? Select the correct answer below: Point A yields a higher utility than point B. Point B yields a higher utility than point A. Both points A and B yield the same level of utility It is not possible to answer with the given information.
Huang is determining how much Coke and Pepsi he will buy. Use the information in italics to answer the bolded question below. • Huang's preferences for Coke (C) and Pepsi (P) are represented by the following utility function: U = 2C + 3P • Huang has $12 to spend on soft drinks. • The price of Coke (P) is $0.50/can. • The price of Pepsi (Pp) is $1.00/can. Based on his income and prices of either good, what is the most Huang could buy of either soft drink? 1. Maximum amount of Pepsi [Select] II. Maximum amount of Coke [Select]
The tables show the utility Parker experienced from consuming varying quantities of waffles and pancakes. Assume that waffles cost $2.00 each, pancakes cost $1.00 each, and that Parker has $8.00 to spend on these two goods. Since Parker cannot afford more than four waffles or eight pancakes, the utility is given only for quantities smaller than these. Quantity of waffles Total utility of waffles Marginal utility of waffles 1 100 100 2 180 80 3 240 60 4 270 30 Quantity of pancakes Total utility of pancakes Marginal utility of pancakes 1 40 40 2 70 30 3 90 20 4 105 15 5 115 10 6 120 5 7 123 3 8 125 2 Given his budget constraint, determine what quantities of waffles and pancakes Parker will consume to maximize utility. quantity of waffles: waffleswaffles quantity of pancakes: pancakes
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.
Suppose a consumer has a budget of $200 to spend on two goods, X and Y, whose prices are $20 and $10, respectively. If the consumer is observed to buy 5 units of X and 10 units of Y, where the respective Marginal Utilities of X and Y are, 50 and 40 utils, is the consumer in equilibrium? Explain why or why not. If the consumer is not in equilibrium under conditions in d), suggest another combination that would possibly achieve equilibrium. Explain your answer.
PROBLEM (4) You have the Cobb-Douglas utility function u(x, y) = xy over apples (x) and plums (y) and you have $120 budget to spend and can carry at most 480 ounces in weight in your backpack going back to the dorm. Each apple costs $1 and weighs 8 ounces, and each plum costs $3 and weighs 4 ounces. You can only leave the store with a bundle of fruits you can afford and carry. (a) Drawing the relevant lines, intercepts, marking the points and hence identifying the feasible set of bundles, calculate the optimal bundle. (b) Forget about (a). If you were to choose a backpack before going on this shopping trip, for the weight constraint not to be an issue for you, how many ounces of weight capacity would you need for your backpack? HINT: That is, for this weight capacity of the backpack, you'd be able to carry the best bundle you can afford, i.e, the weight constraint is not binding for your decision. (c) Forget about (b). In (a), just before going out for shopping with your backpack to…
Question #2 Assume you went to the supermarket with (42) SR in your pocket to be spent on fruits. You find the price tag as (7) SR per Kg for oranges and (21) SR per Kg. for white grapes. The marginal utility (assumed measurable) of each good is independent of the rate of consumption of other good. The marginal utility schedule is as follows: Marginal Utility Schedule Units of good Marginal Utility of MUo/Po Marginal Utility of White grapes Oranges 60 55 48 40 30 24 1 2 3 4 5 6 24 22 20 18 16 14 3.43 3.14 2.86 2.57 2.29 2.00 MUg/Pg 2.86 2.62 2.29 1.90 1.43 1.14
Rhea is determining how many gallons of milk (M) and loaves of bread (B) to purchase. Use the information in italics to answer the bolded question below: Rhea's marginal utility function for milk: MUN • Rhea's marginal utility function for bread: M = 0.5M-2 MUB = 0.5MB-1/2 • Rhea has $60 to spend on bread and milk. • The price of milk (Pm) is $3/gallon of milk. • The price of bread (Pb) is $1/loaf of bread. • For the sake of computation, assume that bread is the horizontal axis good (i.e., good X) and milk is the vertical axis good (i.e., good Y). When you set up the optimal budget decision rule for Rhea's consumer problem, which of the following statements best describes how much she will buy of both goods at her consumer equilibrium? O For each gallon of milk, Rhea will buy 1/3 loaf of bread. O For each gallon of milk, Rhea will buy 3 loaves of bread. For each gallon of milk, Rhea will buy 1 loaf of bread. O For each gallon of milk, Rhea will buy 6 loaves of bread.
Huang is determining how much Coke and Pepsi he will buy. Use the information in italics to answer the bolded question below. • Huang's preferences for Coke (C) and Pepsi (P) are represented by the following utility function: • Huang has $12 to spend on soft drinks. • The price of Coke (P) is $0.50/can. • The price of Pepsi (Pp) is $1.00/can. U = 2C + 3P Based on his budget constraint and preferences, which of the following statements best describes Huang's utility maximizing choice of Coke and Pepsi? [Select] What level of utility does he enjoy from this choice? [Select ] ()
10.6 For every two boxes of strawberries that she consumes, Millicent insists on having one pitcher of cream. She does not, however, insist on consuming the same amount every week. Her utility function is U = min{$₁,2c₁}min{$2,2c2} where s₁ and s2 are the number of boxes of strawberries she consumes this week and next week and c₁ and c₂ are the number of pitchers of cream she consumes this week and next. Strawberries cost $2 a box and cream costs $1 a pitcher. She has a present value of $100 to spend on these goods in the next two weeks. The weekly interest rate is 1%. How many boxes of strawberries will she consume this week? (a) 10 (b) 20 (c) 22 (d) 14.1 (e) 6.06
Every month, a family of three spends $2,000 on food (F) and other items (O). The family’s preferences are represented by the utility function U(F,O) = F1/5O4/5. The unit price of food and the unit price of other items are both $1. Find this family’s monthly food expenditure.The family could join a consumers’ club. At the club, food costs 20% less than in other stores (i.e., at the food club PF = $0.8)

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