Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 6, Problem 2.3P
(a)
To determine
The
(b)
To determine
The law of diminishing marginal utility.
(c)
To determine
What quantity of Cigars and Brandy will maximize satisfaction?
(d)
To determine
The changes in marginal utility and marginal utility per dollar when price increases to $9.
(e)
To determine
What quantity of Cigars and Brandy will consumer purchase after the price change?
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Students have asked these similar questions
b) Diana has $6.00 to spend. She has the option to buy two goods: sandwiches and
peppermints. Sandwiches cost $3.00 each, and peppermints cost $1.00 per pack. The table
below shows the utility Diana derives from consuming sandwiches or peppermints at
various levels of consumption.
In the table below, compute and complete the table below for the marginal utility per
dollar for each level of consumption.
i.
Peppermints
Marginal Utility/
$ (price per each)
Sandwiches
Marginal
Utility
Marginal utility/
$ (price per each)
Marginal
Utility
Units
purchased
1
9
15
9
3
4
4
n/a
n/a
1
ii.
Briefly explain how Diana should spend the first $3.00.
Consider the figures to the right. Suppose that the individual currently consumes 5 digital apps. What
happens to the person's total utility if they reduce their consumption to 4 units? Why does this fact imply
that the marginal utility curve cuts through the horizontal axis of the lower figure between the fourth and
fifth app consumed?
Reducing consumption to 4 apps from 5 apps leaves total utility
at
utils in the upper
, which is the
figure. Hence, the marginal utility between these two quantities of apps equals
value of the
axis in the lower figure. Thus, the marginal utility curve crosses the
axis of the lower figure between units 4 and 5. (Enter your responses as
whole numbers.)
Marginal Utility (utils per week)
6-
4-
22
Total Utility (utils
+ q r
per week)
14-
12-
10-
20
ø Ø
18-
04
0
Downloaded Digital Apps Utilized per Week
Downloaded Digital Apps Utilized per Week
G
Q
For the utility function above, if the price of the good is $4, what is the marginal Utility per Dollar for the fourth unit consumed?
For the utility function above, if the price of the good is $2, what is the marginal Utility per Dollar for the second unit consumed?
Chapter 6 Solutions
Principles of Economics (12th Edition)
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