Section II: Indifference Curves Problem Q7 Given the information in Problem Q5, calculate and interpret the value of the marginal rate of substitution (MRS) at the utility-maximizing point (UMP) where utility is maximized subject to the budget constraint. Make sure to use the MRS format from class and make sure to use relevant units and names in the interpretation. It may help to visualize the graph. 6 of 19 AGB 212 W 24 / Unit 1 Assessment For the following two problems, assume that the goods being consumed are eggplant (measured in pounds) and Brussels sprouts (measured in pounds) where Brussels sprouts are on the vertical axis and eggplant is on the horizontal axis. The price of Brussels sprouts is $5.50/lb (PB = $5.50) and the price of eggplant is $6.50/lb (P = $6.50). NOTE: You may want to sketch out the axes. Problem Q8 At a Point Q (no picture is provided but you might draw it), a budget line intersects (but is not tangent to) an indifference curve. At that point, the marginal rate of substitution is -3.5 (MRS = -3.5). If you want to move along the indifference curve by one additional pound of Brussels sprouts, calculate how much the total expenditure will change. Show your work and be sure to also clearly indicate the direction of the change (up or down).
Section II: Indifference Curves Problem Q7 Given the information in Problem Q5, calculate and interpret the value of the marginal rate of substitution (MRS) at the utility-maximizing point (UMP) where utility is maximized subject to the budget constraint. Make sure to use the MRS format from class and make sure to use relevant units and names in the interpretation. It may help to visualize the graph. 6 of 19 AGB 212 W 24 / Unit 1 Assessment For the following two problems, assume that the goods being consumed are eggplant (measured in pounds) and Brussels sprouts (measured in pounds) where Brussels sprouts are on the vertical axis and eggplant is on the horizontal axis. The price of Brussels sprouts is $5.50/lb (PB = $5.50) and the price of eggplant is $6.50/lb (P = $6.50). NOTE: You may want to sketch out the axes. Problem Q8 At a Point Q (no picture is provided but you might draw it), a budget line intersects (but is not tangent to) an indifference curve. At that point, the marginal rate of substitution is -3.5 (MRS = -3.5). If you want to move along the indifference curve by one additional pound of Brussels sprouts, calculate how much the total expenditure will change. Show your work and be sure to also clearly indicate the direction of the change (up or down).
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Question
Transcribed Image Text:Section II: Indifference Curves
Problem Q7
Given the information in Problem Q5, calculate and interpret the value of the marginal rate of
substitution (MRS) at the utility-maximizing point (UMP) where utility is maximized subject to
the budget constraint. Make sure to use the MRS format from class and make sure to use
relevant units and names in the interpretation. It may help to visualize the graph.
6 of 19
AGB 212 W 24 / Unit 1 Assessment
For the following two problems, assume that the goods being consumed are eggplant
(measured in pounds) and Brussels sprouts (measured in pounds) where Brussels sprouts are
on the vertical axis and eggplant is on the horizontal axis. The price of Brussels sprouts is
$5.50/lb (PB = $5.50) and the price of eggplant is $6.50/lb (P = $6.50). NOTE: You may want to
sketch out the axes.
Problem Q8
At a Point Q (no picture is provided but you might draw it), a budget line intersects (but is not
tangent to) an indifference curve. At that point, the marginal rate of substitution is -3.5 (MRS
= -3.5). If you want to move along the indifference curve by one additional pound of Brussels
sprouts, calculate how much the total expenditure will change. Show your work and be sure
to also clearly indicate the direction of the change (up or down).
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