Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 20, Problem 4CQ
To determine
Utility maximizing condition
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A consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is $30, and T-shirts cost $10. At the current rate of consumption, the marginal utility of jeans is 60, and the marginal utility of T-shirts is 30. Is this consumer maximizing his or her utility? Would you suggest that he buy more jeans and fewer T-shirts, or more T-shirts and fewer jeans?
Aria consumes only two goods, food and clothing. The marginal utility of the last dollar she spends on food is 12, and the marginal utility of the last dollar she spends on clothing is 9. The price of food is $1.20/unit, and the price of clothing is $0.90/unit. Is Aria maximizing her utility?
A consumer has a budget to spend on Shoes and Socks. At their current levels of consumption, they
spend their entire budget and receive 0.60 marginal utility per dollar from Shoes and 0.40 marginal
utility per dollar from Socks. How should they change their consumption to maximize their utility?
Buy more Shoes and fewer Socks.
Buy only Shoes, and no Socks.
Buy more Shoes and more Socks.
Buy only Socks, and no Shoes.
Buy fewer Shoes and more Socks
Chapter 20 Solutions
Economics: Private and Public Choice (MindTap Course List)
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Similar questions
- At what point does a consumer maximize utility?arrow_forwardAmy is currently spending all of her budget and she finds that the marginal utility per dollar from dresses is less than the marginal utility per dollar from hats. To maximize her utility, Amy should buy fewer dresses and hats. more hats and fewer dresses. more dresses and fewer hats. more dresses and hats. probably change her purchases but more information is needed to determine if she should buy more or fewer dresses and hats.arrow_forwardwhat is A curve showing combinations of two goods that provide a consumer with a constant amount of utility ?arrow_forward
- How can one's choice of purchases/consumption be infuenced by utility or marginal utility?arrow_forwardA consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is $60, and shirts cost $10. At the current rate of consumption, the marginal utility of jeans is 240, and the marginal utility of shirts is 30. Based on the model of consumer choice, what should this consumer do to maximize utility? Purchase fewer shirts and more jeans. Purchase more shirts and fewer jeans. Purchase only jeans. This consumer is already maximizing utility. Purchase only shirts.arrow_forwardhow do I illustrate an increase in a price of an item resulting in consumers buying another itemarrow_forward
- Describe the point at which a consumer maximizes utility.arrow_forwardQuestion 2 A consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is $50, and shirts cost $25. At the current rate of consumption, the marginal utility of jeans is 150, and the marginal utility of shirts is 100. Based on the model of consumer choice, what should this consumer do to maximize utility? Purchase more shirts and fewer jeans. Purchase fewer shirts and more jeans. Purchase only jeans. This consumer is already maximizing utility. Purchase only shirts.arrow_forwardThink about a favorite thing you often buy or enjoy. It could be your favorite food, a favorite place to visit, a type of event, or something you make us part of a hobby. As part of this review you will create a chart ( just like the examples of total in marginal utility) showcasing the favorite item. Include the following information: How many you purchase or consume in the course of a day, week, or a month. Marginal utility of additional consumptions The total utility of all consumptions. Let’s assume that the largest utility you get from any one item is 20. Make it as interesting as you can by considering something that is important to you. Fill in the chart. arrow_forward
- Becky needs to decide how many cups of coffee and pieces of cake she will buy for a meeting with an office mate. She estimates her total utility for different quantities of coffee and cakes below. A cup of coffee is $1.00, and each piece of cake is $0.50. Becky has a total of $3 to spend. What is Becky's total utility if she buys 1 cup of coffee and 4 pieces of cake? Cups of Coffee 1 2 3 4 5 6 Utility from Consumption Pieces of Cake 1 2 3 4 5 6 A B C D Total Utility from Cups of Coffee 33 56 79 Total Utility from Pieces of Cake 15 32 48 63 77 90 Total Utility of Different Consumption Bundles Consumption Bundle Cups of Coffee Pieces of Cake Total Utility 3 0 2 2 1 4 0 6arrow_forwardHow many drink(s) and Big Mac(s) should you purchase to reach consumer optimum?arrow_forwardThe table details the total utility that J.J. gets from going to see basketball and hockey games during a month. J.J. had $120 to spend. Calculate the marginal utility and the marginal utility per dollar spent for both basketball and hockey given that the price is $20 and $30 respectively. Based on your calculations: how many basketball games would he attend? how many hockey games would he attend?arrow_forward
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