Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:4. Suppose there are two firms selling protein bars. Firm one sells 'AggieBars' with 10 grams of
protein and firm 2 sells 'DavisBars' with 20 grams of protein.
Consumers are distributed uniformly over their preferences for grams of protein between 10 and
20.
Suppose firm 1 sells AggieBars for $2 and firm 2 sells DavisBars for $3
The 'cost' to consumers of deviating from their optimal amount of protein is $0.20 per gram of
protein.
a.
What protein content does the marginal consumer (consumer who is indifferent between
AggieBars and DavisBars) prefer?
The equation for finding the marginal consumer (when the range of product attribute values is
10) is: VP₁-txm = V - P₂ - t(10 - xm)
4
b. How would the proportion of consumers buying each product change if the cost to deviation
from one's optimal amount of protein increased (was greater than $0.20 per gram)? Explain the
economic intuition behind your result.
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