Suppose Megan has a yearly budget of $240 to spend on juice and cereal. Juice is priced at $4 per gallon, and cereal is priced at $6 per box.If Megan spends her entire $240 on juice, she can buy60 gallons of juice. If she spends her entire $240 on cereal, she can buy40 boxesof cereal.Use the blue line (circle symbol) to plot Megan's budget constraint on the following graph. Next, use the orange point (square symbol) to shade thearea that represents combinations of juice and cereal that are affordable for Megan. Finally, place the black point (plus symbol) on the point onMegan's budget constraint that corresponds to a scenario in which Megan spends $120 on each good.Note: Dashed drop lines will automatically extend to both axes.120110100Вс, ($240)9080Affordable Region706050$120 on Each403020BC, ($360)10+102030405060708090100 110 120JUICE (Gallons)CEREAL (Boxes) What does the slope of Megan's budget constraint represent?The cost of an additional box of cereal in terms of dollarsThe cost of an additional gallon of juice in terms of dollarsThe opportunity cost of an additional box of cereal in terms of gallons of juiceThe opportunity cost of an additional gallon of juice in terms of boxes of cerealSuppose Megan receives $120 from her grandmother and decides to dedicate this money to buying more juice and cereal.Using the green line (triangle symbol), draw Megan's new budget constraint on the preceding graph.True or False: Megan faces a new tradeoff between juice and cereal.TrueFalse

We are going to use microeconomic concepts such as budget constraint, opportunity cost to answer…

What does the slope of Megan's budget constraint represent? The cost of an additional box of cereal in terms of dollars The cost of an additional gallon of juice in terms of dollars The opportunity cost of an additional box of cereal in terms of gallons of juice The opportunity cost of an additional gallon of juice in terms of boxes of cereal Suppose Megan receives $120 from her grandmother and decides to dedicate this money to buying more juice and cer Using the green line (triangle symbol), draw Megan's new budget constraint on the preceding graph. True or False: Megan faces a new tradeoff between juice and cereal. True False

What does the slope of Megan's budget constraint represent? The cost of an additional box of cereal in terms of dollars The cost of an additional gallon of juice in terms of dollars The opportunity cost of an additional box of cereal in terms of gallons of juice The opportunity cost of an additional gallon of juice in terms of boxes of cereal Suppose Megan receives $120 from her grandmother and decides to dedicate this money to buying more juice and cer Using the green line (triangle symbol), draw Megan's new budget constraint on the preceding graph. True or False: Megan faces a new tradeoff between juice and cereal. True False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

If Masha devotes all her time to making cookies, she can make 3 pounds of cookies an hour, and if she devotes all her time to baking bread, she can make 2 pounds of bread an hour. If Sasha devotes all his time to making cookies, he can make 4 pounds of cookies an hour, and if he devotes all his time to baking bread, he can bake 5 pounds of bread an hour. Which of the following is true? There will be no gains from trade for Sasha and Masha. Masha has an absolute advantage in at least one of the goods Both Sasha and Masha would agree to trade 1 cookie for 1 pound of bread. Sasha is better-off by himself
John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours Per Day Cleaning Windows 0 1 2 3 4 5 $2 What is the lowest price per window that John would be willing to accept to spend 4 hours per day cleaning windows? $11 $3.50 $7 32 Total Number of Windows Cleaned 0 7 11 14 16 17 |||
Deborah is a skilled toy maker who is able to produce both boats and kites. She has 8 hours a day to produce toys. The following table shows the daily output resulting from various possible combinations of her time. Choice Hours Producing Produced (Boats) (Kites) (Boats) (Kites) A 8 0 4 0 B 6 2 3 10 C 4 4 2 16 D 2 6 1 19 E 0 8 0 20 On the following graph, use the blue points (circle symbol) to plot Deborah's initial production possibily
Juan is currently working in a job that pays $25 an hour and he chooses to work 8 hours per day. Assume that Juan can work a maximum of 16 hours a day, and he has complete flexibility in how many hours a day he works. Illustrate Juan’s budget constraint and his optimal choice of consumption and leisure. What is the slope of his budget constraint? What does this slope represent? (As on any graph you draw, make sure that you label the axes, the intercepts and the optimal choice.) Juan begins receiving a government transfer payment of $100 per day. Add his new budget constraint to your graph in (a) and show his new optimal choice. Does he choose more or less consumption? More or less leisure? Explain why for both goods. The government imposes a tax of 25% on Juan’s earnings from work and increases his government transfer to $150 per day (the government transfer payment is not taxed.) Redraw the budget constraint from part (b) (omit the part (a) budget constraint), and add a new budget…
Lashed is a college student and lives off a budget of $100/week. She spends all of it on Chipotle meals and/or Starbucks. Her Chipotle meal costs her $10 and her Starbucks bucks drink costs her $6. Calculate the opportunity costs of one of her Starbucks drinks in terms of Chipotle meals. Write your answer as a whole number or using decimals. For instance, 2, 3, 0.4, 0.8, 1.5, etc.
Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha’s preferences for leisure and pizza are given by the following utility function: . U(L,P)= 3L + P MU(L)= 3 MU(P)=1 Write down Aisha’s budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. Calculate Aisha’s marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. Find Aisha’s optimal consumption bundle, both algebraically and graphically. Explain your reasoning. Would Aisha’s optimal choice change if she could get a discount on her pizza purchases so that each pizza would cost…
Graham brings $20 to his local college hockey game in order to purchase cheeseburgers and seltzer. The following diagram presents his budget constraint: CANS OF SELTZER 10 6 B 5 4 3 r 0 1 2 BC 4 5 6 CHEESEBURGERS 7 According to the diagram, cheeseburgers cost $ 8 9 10 BC each, and seltzer costs $ (?) per can. Adjust the diagram to show how Graham's budget constraint would change if the price of seltzer decreased. (Assume the price of cheeseburgers and Graham's income remain the same.) Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.
urgent
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.
Homer Simpson has a budget of $100 allocated for the consumption of burgers and donuts. If the price of a burger is $5 and if each donut costs $2.50, then how many donut can Homer Simpson can buy with his remaining budget if he buys 10 burgers? Select one: a.12 b.10 c.16 d.20
Antonio likes to have coffee (C) and donuts (D) for breakfast every morning. He likes to dip his donuts into his coffee, so for every cup of coffee, he eats one and a half donuts. In economic terms, we can say he views one cup of coffee as a perfect complement to one and a half donuts. The price of a cup of coffee is $4.5 and the price of one donut is $2. His budget for breakfast this month is $75. (a) Write down a utility function that represents Antonio's preferences over (cups of) coffee (C) and donuts (D). (There may be many functions representing the same preferences, so you can choose either of them.) (b) How many cups of coffee (C) and donuts (D) is he going to consume? (Hint: the first order conditions will not help; draw the budget constraint and the indifference curves and look at the highest indifference curve that has a point in common with the budget constraint). (c) What is the exact value of Antonio's indirect utility for the utility function you chose in (a)?
As an economics student your budget for meals at the university is Rs 12,000 and you have two options during the course of you studies: Eating at the university cafeteria for Rs 40 per meal Eating at the dining hall for Rs 10 per meal. b. What would happen to budget constraint if i.your income falls and budget available for meals falls to Rs 8,000. Using your diagram from part (a), show the consequences of this change, assuming both meals are ‘normal’ and label the new optimum as point B. ii. if price of dinning hall meals rises to Rs 20. Using your diagram from part (a), show the price effect and label the new optimum as point B’.