Manny consumes only bananas and DVDS, and is currently on his highest possible indifference curve. Two bundles on this indifference curve are bundle A (5 bananas and 2 DVDS), and bundle B (3 bananas and 3 DVDS). Between points A and B, what is Manny's marginal rate of substitution of bananas for DVDS? OA. 1 Ов.2 OC. 3 OD. 4/3

Manny consumes only bananas and DVDS, and is currently on his highest possible indifference curve. Two bundles on this indifference curve are bundle A (5 bananas and 2 DVDS), and bundle B (3 bananas and 3 DVDS). Between points A and B, what is Manny's marginal rate of substitution of bananas for DVDS? OA. 1 Ов.2 OC. 3 OD. 4/3

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.2P

See similar textbooks

Similar questions

Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
Assume Pat spends all of her allowance to purchase 4 apples and 4 candy bars. Pat's marginal utility of the fourth apple is 20 utils, and her marginal utility of the fourth candy bar is 40 utils. If an apple costs $1.00 and a candy bar $0.50, to maximize utility Pat should(A) purchase more apples and more candy bars(B) maintain the current purchase of 4 apples and 4 candy bars(C) purchase more apples and fewer candy bars(D) purchase fewer apples and more candy bars(E) purchase fewer apples and fewer candy bars
8 of 15 Izzy who consumes only grilled chicken sandwiches and salads with low-fat dressing, has a weekly income of $50. She is currently consuming 5 grilled chicken sandwiches per week, at a price of $6 each, and 2 salads per week, at a price of $10 each. If the last sandwich and the last salad both added 15 units to Izzy's total utility: O A. She is making the utility-maximising choice OB. She should buy more salads and fewer sandwiches OC. She should buy more sandwiches and fewer salads O D. She obtains more additional utility per dollar from salads than from sandwiches Both B and D. O No answer.
-uppose John is currently at point A on the indifference curve to the right. If he moves to point B, en A. the level of utility remains constant because the marginal utility of pizza increases and the marginal utility of Pepsi decreases. OB. the level of utility increases because the marginal utility of pizza increases. OC. the level of utility remains constant because the marginal utility of pizza decreases and the marginal utility of Pepsi increases. OD. the level of utility decreases because the marginal utility of Pepsi decreases. Pepsi (bottles per week) B Pizza (slices per week)
3. Finding the optimal combination of two goods - $2. Suppose that Larry buys Larry enjoys consuming both cheese and fruit. Each pound of cheese costs Pc = $1, and each pound of fruit costs PF 300 pounds of cheese and 200 pounds of fruit per year. The following graphs show his marginal utility curves for cheese and fruit. At his current consumption level, Larry's marginal utility from consuming the last pound of cheese he bought is MUC S 30 utils per pound, and his marginal utility from consuming the last pound of fruit he bought is MUF = 30 utils per pound. 60 40 30 IL 20 10 400 500 600 50 40 A 30 B C D 20 10 0 0 100 Is Larry currently maximizing his utility? Combination 200 300 CHEESE (Pounds per year) 300, 30 (Pounds per Year) 200 400 300 No; he could buy less cheese and more fruit, not spend any more money, and be better off. O No; he likes fruit and cheese more than other goods, so he should buy more of both. O No; he could buy more cheese and less fruit, not spend any more money,…
6. Reggie consumes only two goods: food and shelter. On a graph with shelter on the horizontal axis and food on the vertical axis, his price consumption curve for shelter is a vertical line. Draw a pair of budget lines and indifference curves that are consistent with this description of his preferences. What must always be true about Reggie's income and substitution effects as the result of a change in the price of shelter?
1. What is the difference between ordinal utility and cardinal utility? Explain why the assumption of cardinal utility is not needed in order to rank consumer choices! 2. Can you explain why taking a monotonic transformation of a utility function doesn't change the marginal rate of substitution? 3. Assume that Rossi consumes only bananas and avocado. Fortunately, she likes both goods. The consumption bundle where Rossi consumes xl units of bananas per week and x2 units of avocado per week is written as (x1, x2). (a) In fact, Rossi's preferences can be represented by the utility function u(x1, x2) = 4/x1 + x2. The price for bananas is $1 per unit and the price for avocado is $2 per unit. Rossi has $24 to spend on the two goods. Write down Rossi's budget constraint and solve for her optimal consumption bundle. (b) Now Rossi has $10 more to spend on the two goods ($34 in total), and what is her optimal consumption bundle now? Compare your solution with the previous one. Can you say…
K Paul consumes only books and DVDs. At his current consumption bundle, his marginal utility from DVDS is 25 and from books is 3. Each DVD costs $13, and each book costs $2. Is he maximizing his utility? Explain. Let MUB be the marginal utility of books, MUD be the marginal utility from DVDs, PB be the price of books, Pp be the price of DVDs, and MRS be the marginal rate of substitution. Paul is OA. maximizing his utility because MUB PB = MUD PD MUB MUD OB. not maximizing his utility because < PB PD MUB OC. maximizing his utility because MRS = MUD MUB MUD OD. maximizing his utility because < PB PD MUB O E. not maximizing his utility because MRS < MUD If he is not, how can he increase his utility while keeping his total expenditure constant? Paul could increase utility while keeping total expenditures constant by consuming more and fewer
Jason has the following utility function: U = F2C where F is food and C is clothing. Clothing is measured on the vertical axis while food is measured on the horizontal one. Suppose the price of food is €3 per unit, the price of clothing is €2 per unit and that Jason's income is €36. Calculate the number of units of clothing that Jason consumes in equilibrium. ourCTIOu
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.
2
Ann consumes only cookies and muffins. At her current consumption bundle,her marginal utility from cookies is 3 and her marginal utility from muffins is 2. Eachcookie costs $2 and each muffin costs $1. Is she maximizing her utility? If not, how canshe increase her utility while keeping her expenditure constant?