Musashi plays the cello as part of a string duo and advertises booking opportunities using brochures he distributes in coffee shops around the city. Making one grayscale brochure costs $0.02, but adding color increases the cost to $0.08 per brochure. Musashi sets aside a monthly budget of $14.00 for creating brochures. The following graph shows three of Musashi's indifference curves for the number of grayscale and color brochures that he makes. Use the green line (triangle symbol) to plot Musashi's budget constraint. Then, place the black point (plus symbol) on the graph to indicate Musashi's optimal consumption choice given that budget constraint. GRAYSCALE BROCHURES 1000 900 800 700 600 500 400 300 200 100 4 0 0 25 50 75 100 125 150 175 200 COLOR BROCHURES 225 250 Budget Constraint + Optimum ? At the optimum that you indicated on the graph, Musashi's marginal rate of substitution is equal to 4 brochures in grayscale per brochure in

Musashi plays the cello as part of a string duo and advertises booking opportunities using brochures he distributes in coffee shops around the city. Making one grayscale brochure costs $0.02, but adding color increases the cost to $0.08 per brochure. Musashi sets aside a monthly budget of $14.00 for creating brochures. The following graph shows three of Musashi's indifference curves for the number of grayscale and color brochures that he makes. Use the green line (triangle symbol) to plot Musashi's budget constraint. Then, place the black point (plus symbol) on the graph to indicate Musashi's optimal consumption choice given that budget constraint. GRAYSCALE BROCHURES 1000 900 800 700 600 500 400 300 200 100 4 0 0 25 50 75 100 125 150 175 200 COLOR BROCHURES 225 250 Budget Constraint + Optimum ? At the optimum that you indicated on the graph, Musashi's marginal rate of substitution is equal to 4 brochures in grayscale per brochure in

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 9P

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Suppose you have $10, which you can wager in a game called "double or quits." In this game, you roll a fair die. If you roll a 4, 5, or 6, you win the game, getting back your $10 plus $10 more for a total of $20. If you roll a 1, 2, or 3, you lose the game and your $10. Your utility function is shown on the following graph Utility 10 20 Income According to this graph of your utility function, would you be considered risk-averse or a risk-taker? Why? Risk averse because of increasing marginal utility of income Risk taker because of increasing marginal utility of income Risk taker because of diminishing marginal utility of income O Risk averse because of diminishing marginal utility of income
John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke, or does he show increasing marginal utility for Coke? Supposethat John has $3 in his pocket. If Cokes cost $1 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too? What about the third dollar? If John’s marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke?
The following table shows the marginal utility per dollar of apples and pears for five consumers: Consumer Marginal Utility Per Dollar Apples Pears Darnell 8 5 Eleanor 7 8 Jacques 6 6 Kyoko 5 4.5 Musashi 4 4 Darnell, Eleanor, and Kyoko are not optimizing over their choice of fruit. In the following table, indicate which fruit each consumer should increase consumption of in order to achieve the optimal fruit consumption bundle. Consumer Apples Pears Darnell Eleanor Kyoko
Suppose Kate has a weekly budget of $24 to spend on seltzer water and peanut butter. Seltzer water is priced at $2 per case, and peanut butter is priced at $6 per jar. If Kate spends her entire $24 on seltzer water, she can buy jars of peanut butter. Use the blue line (circle symbol) to plot Kate's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of seltzer water and peanut butter that are affordable for Kate. Finally, place the black point (plus symbol) on the point on Kate's budget constraint that corresponds to a scenario in which Kate spends $12 on each good. Note: Dashed drop lines will automatically extend to both axes. PEANUT BUTTER (Jars) 24 22 20 18 16 14 10 4 2 0 0 + 2 + 6 8 10 12 14 16 SELTZER WATER (Cases) 18 cases of seltzer water. If she spends her entire $24 on peanut butter, she can buy 20 22 24 O BC, ($24) 0 Affordable Region + $12 on Each BC₂ ($48) (?)
Last Sunday, Olive went to a restaurant. She narrowed her appetizer choices to shrimp cocktail at a price of $6.00 or calamari at a price of $8.00. She ultimately chose the calamari. As a result, what can be concluded about the relationship between Olive's marginal utilities for shrimp coctail and calamari? (It says to indicate a specific numeric relationship)
Paolo enjoys consuming both soda and coffee. Each can of soda costs Ps = $1, and each cup of coffee costs Pc = $2. Suppose that Paolo buys 75 cans of soda and 50 cups of coffee per month. The following graphs show his marginal utility curves for soda and coffee. At his current consumption level, Paolo's marginal utility from consuming the last can of soda he bought is MUS = 12 utils per can, and his marginal utility from consuming the last cup of coffee he bought is MUC = 12 utils per cup. 24 20 20 16 25 50 75 100 125 150 25 50 75 100 125 150 SODA (Cans) COFFEE (Cups) Is Paolo currently maximizing his utility? O No; he likes coffee and soda more than other goods, so he should buy more of both. O No; he could buy less soda and more coffee, not spend any more money, and be better off. O Yes; the marginal utility he receives from his last can of soda equals that of his last cup of coffee. O No; he could buy more soda and less coffee, not spend any more money, and be better off. MU OF SODA…
Brenda wants to buy new car and has a budget of $25,000. She has just found a magazine that assigns each car an index for styling and an index for gas mileage. Each index runs from 1 to 10, with 10 representing either the most styling or best gas mileage. While looking at the list of cars, Brenda observes that on average, as the style index increases by one unit, the price of the car increases by $6,250. She also observed that as the gas-mileage index rises by one unit, the price of the car increases by $5,000. Illustrate the various combinations of style (S) and gas mileage (G) that Brenda could select with her $25,000 budget. Using the line drawing tool, illustrate Brenda's budget line. Label this line 'Budget Line'. Carefully follow the instructions above, and only draw the required object. Suppose Brenda's preferences are such that she always receives two times as much satisfaction from an extra unit of styling as she does from gas mileage. What type of car will Brenda choose?…
5. Indifference curves and utility maximization Becky plays the cello as part of a string duo and advertises booking opportunities using brochures she distributes in coffee shops around the city. Making one grayscale brochure costs $0.02, but adding color increases the cost to $0.10 per brochure. Becky sets aside a monthly budget of $20.00 for creating brochures. The following graph shows three of Becky's indifference curves for the number of grayscale and color brochures that she makes. Use the green line (triangle symbol) to plot Becky's budget constraint. Then, place the black point (plus symbol) on the graph to indicate Becky's optimal consumption choice given that budget constraint. GRAYSCALE BROCHURES 1000 900 800 700 600 500 400 300 200 100 0 0 25 50 ¹₂ 75 100 125 150 175 200 225 250 COLOR BROCHURES Budget Constraint Optimum ? At the optimum that you indicated on the graph, Becky's marginal rate of substitution is equal to color. in grayscale per brochure in
John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke or does he show increasing marginal utility for Coke? Suppose that John has $3 in his pocket. If Cokes cost $1 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too? What about the third dollar? If John’s marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke? *use tables and/or graphs if possible, please original work
The following table shows Ellie's utility from consuming slices of pie and cans of 7 - Up. Slices of Pie 0 1 23456 Marginal Utility Cans from Last Slice of 7-Up 0 1 2 120 100 80 60 40 20 234 5 6 Marginal Utility from Last Can 120 60 45 30 20 15 Suppose Ellie has $6 per week to spend on pie and 7 - Up and that the price of a slice of pie is $1.00. 1.) Use the point drawing tool to plot Ellie's demand for 7-Up at a price of $2.00. Label this point 'A'. 2.) Use the point drawing tool to plot Ellie's demand for 7- Up at a price of $0.50. Label this point 'B'. 3.) Use the line drawing tool to connect the dots to form Ellie's demand curve. Properly label this line. Carefully follow the instructions above, and only draw the required objects. Price of 7-Up 12 4.5- 4- 3.5- 3- 2.5- 2- 1.5- 1- 0.5- 0- 3 4 Quantity of 7-Up 5
Enrique is a movie buff. He likes to watch on demand movies from his cable company, which cost $5 each, and so likes to go to the local movie house, which charges $15 a ticket. Suppose that given his budget and his tentative spending plans, the marginal utility from a cable movie is 15 utils and the marginal utility of a movie at the local cinema is 45 utils. Assuming he is spending his entire budget, Enrique is currently maximizing his utility Enrique can increase his utility by buying more cable movies and watching fewer cinema movies Enrique can increase his utility by buying more cinema movies and fewer cable movies
7.2 In Problem 7.3, Pierre's friend Henri lives in a town where he has to pay 3 francs per glass of wine and 6 francs per loaf of bread. Henri consumes 6 glasses of wine and 4 loaves of bread per day. Recall that Bob has an income of $15 per day and pays $.50 per loaf of bread and $2 per glass of wine. If Bob has the same tastes as Henri and if the only thing that either of them cares about is consumption of bread and wine, we can deduce (a) nothing about whether one is better than the other. (b) Henri is better off than Bob. (c) Bob is better off than Henri. (d) both of them violate the weak axiom of revealed preferences. (6) (e) Bob and Henri are equally well off.