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: MUM Rhea's marginal utility function for bread: - 0.5M-B MUB=0.5MB¯½ • 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). Which of the following algebraic expressions represents Rhea's marginal rate of substitution along her indifference curves? MRS = √M √B M B MRS=0.5- MRS = 1 MRS=0.5 Bī Mī M B
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: MUM Rhea's marginal utility function for bread: - 0.5M-B MUB=0.5MB¯½ • 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). Which of the following algebraic expressions represents Rhea's marginal rate of substitution along her indifference curves? MRS = √M √B M B MRS=0.5- MRS = 1 MRS=0.5 Bī Mī M B
Chapter21: Demand: Consumer Choic
Section: Chapter Questions
Problem 1E
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![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:*
\[
MU_M = 0.5M^{-\frac{1}{2}}B^{\frac{1}{2}}
\]
- *Rhea’s marginal utility function for bread:*
\[
MU_B = 0.5M^{\frac{1}{2}}B^{-\frac{1}{2}}
\]
- *Rhea has $60 to spend on bread and milk.*
- *The price of milk (P_m) is $3/gallon of milk.*
- *The price of bread (P_b) 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).*
**Which of the following algebraic expressions represents Rhea's marginal rate of substitution along her indifference curves?**
- \(\quad MRS = \frac{\sqrt{M}}{\sqrt{B}}\)
- \(\quad MRS = 0.5 \frac{M}{B}\)
- \(\quad MRS = 0.5B^{\frac{1}{2}}M^{\frac{1}{2}}\)
- \(\quad MRS = \frac{M}{B}\)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F314f0635-1dd9-4d26-9205-7f03c7b2e19c%2Fe10a3f41-bdc2-4408-9d99-8de421f80b44%2F82n6858_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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:*
\[
MU_M = 0.5M^{-\frac{1}{2}}B^{\frac{1}{2}}
\]
- *Rhea’s marginal utility function for bread:*
\[
MU_B = 0.5M^{\frac{1}{2}}B^{-\frac{1}{2}}
\]
- *Rhea has $60 to spend on bread and milk.*
- *The price of milk (P_m) is $3/gallon of milk.*
- *The price of bread (P_b) 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).*
**Which of the following algebraic expressions represents Rhea's marginal rate of substitution along her indifference curves?**
- \(\quad MRS = \frac{\sqrt{M}}{\sqrt{B}}\)
- \(\quad MRS = 0.5 \frac{M}{B}\)
- \(\quad MRS = 0.5B^{\frac{1}{2}}M^{\frac{1}{2}}\)
- \(\quad MRS = \frac{M}{B}\)
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Consider Bundle A: (B, M) = (12 loaves, 16 gallons).
- If bread is the horizontal axis good, what is Rhea's marginal rate of substitution at bundle A?
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