Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 15, Problem 15.2IP
To determine
The utility of the decision to not vote in the election.
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Sean is arguing with his girlfriend, Yvette. They have been going out for a little more than two years.
YVETTE: I'm leaving you, Sean. Get over it.
SEAN: Are you saying that being single will make you happier than you've been with me? Speaking personally, I think the
utility
we've had in this relationship was much more than you could have had if you'd been single this whole time!
YVETTE: I had taken an economics class and the word "utility" rings a bell. It's not that at all. We've had a fine time. It's that the
utility I would get by continuing our relationship isn't worth it anymore.
SEAN: I've never been dumped by someone citing the law of
before. You're a piece of work, you know that?
Yvette doesn't hear. She has already walked off, leaving Sean feeling like something of a sunk cost.
Donuts are a big thing in Portland, OR. You go into one of the many donut establishments to purchase some number of these tasty (and even vegan or gluten free if required) treats. Let's say that
the first donut has higher utility for you, so you are willing to pay up to $2 for it. For the second donut you are willing to pay $1.50, the third $1, a fourth $0.50 and the fifth $0.00. This particular
bakery in Portland charges an average of $1 per donut. If you are a rational buyer (which can be hard when faced with so many different delicious donuts) then how many donuts do you
purchase, and how much consumer surplus (i.e., money saved compared to what you were willing to spend) do you have?
O 4 donuts, $5
O 2 donuts, $5
O 3 donuts, $1.50
O 1 donut, $0.50
Suppose Mr. and Mrs. Ward agreed not to vote in tomorrow’s election. Would such an agreement improve utility? Would such an agreement be an equilibrium?
Chapter 15 Solutions
Managerial Economics: A Problem Solving Approach
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