EBK ECON MICRO
6th Edition
ISBN: 9781337671828
Author: MCEACHERN
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 3, Problem 3P
To determine
The factors that influence household to decide whether to choose household production or buying it from market place.
Introduction:
Household Production- The goods produced by the members of the family for their own consumption using their own capital and labor (unpaid) is known as household production.
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1. Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3
apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added
5 units to Sadid's utility, while the last bread added 7 units.
Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's
consumption bundle? Why or why not? Give reasons in support of your answer.
State the condition for a consumer's utility maximizing choice and illustrate graphically.
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Firm B
Firm C
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49
4
90
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75
85
6
110
96
106
7
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Does each of these firms experience economies of scale or diseconomies of scale? Explain your answer
with necessary calculations.
1. Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3
apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added
5 units to Sadid's utility, while the last bread added 7 units.
Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's
consumption bundle? Why or why not? Give reasons in support of your answer.
State the condition for a consumer's utility maximizing choice and illustrate graphically.
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