Suppose that Anna goes to a coffee shop to get coffee. The maximum amount he is willing to pay for the first cup of coffee is $2.50, the second cup is $2.00, the third cup is $1.50; the fourth cup is $1.00, the fifth cup is $0.50, and the sixth cup is $0.00 The coffee shop charges a price of $2.00 per cup of coffee. If Anna is rational, she will purchase and gets consumer surplus of cups O 2; $0.50 O 6; $7.50 O 1; $0.50 O 3; $6.00
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- Each month Larry purchases household utilities. His preferences over gallons of heating oil (x) and units of other utilities (y) can be represented by the utility function: U(x,y) = ln x + ln y. Suppose that the market price of heating oil is $4 per gallon, the price of a unit of other utilities is $1, and that Larry has $320 to spend per month on his utilities. The price of heating oil is too high, so the government proposes a per-unit subsidy of $1.60. Larry can buy heating oil at the price of $2.40 with the per-unit subsidy. However, the government adjusts the price of heating oil again. The second proposal sets the market price of heating oil to $2.56. 1) What is the equivalent variation of the price change from $2.40 to $2.56? 2) What is the cost to the government?When consumers have a budget, their utility is maximized by buying a combination of goods such that the marginal utility per dollar is the same for all of these goods. This is because if this were not the case, it would mean that the consumer hadn't used up their entire budget. of their insatiability. if a consumer could get higher marginal utility from one good than from others, they would want to buy more of that good, and less of others. if a consumer could get higher marginal utility from one good than from others, they would want to buy less of that good, and more of others. it guarantees them some variety.Jane has a budget of $15 to spend at the local scientific store. Her two favorite items are beakers (Product X) which costs $3 and petri dishes (Peroduct Y) which costs $2. In the schedule below you can see the marginal utility for each of her favorite items. Which combination would maximize Jane's utility? X y Quantity MUx Quantity MUy 1 40 1 24 2 28 2 20 3 24 3 16 4 20 4 12 5 1 5 8 a.) 3 beakers & 3 petri dishes b.) 4 beakers & 2 petri dishes c.) 5 beakers & 1 petri dishes
- 14.3 (0) Quasimodo consumes earplugs and other things. His utility function for earplugs x and money to spend on other goods y is given by u(x, y) = 100x 2:² 2 +y. (a) What kind of utility function does Quasimodo have? (b) What is his inverse demand curve for earplugs?. (c) If the price of earplugs is $50, how many earplugs will he consume? (d) If the price of earplugs is $80, how many earplugs will he consume? (e) Suppose that Quasimodo has $4,000 in total to spend a month. What is his total utility for earplugs and money to spend on other things if the price of earplugs is $50?Rohan’s current marginal utility from consuming peanuts is 100 utils per ounce and his marginal utility from consuming cashews is 200 utils per ounce. If peanuts cost $0.10 per ounce and cashews cost $0.50 per ounce, is Rohan maximizing his total utility from the kinds of nuts? Enter your responses as whole numbers. At the current level of peanut consumption, Rohan receives: utils per dollar.At the current level of cashew consumption, Rohan receives: utils per dollar.Therefore, Rohan maximizing his total utility because MUp/Pp is MUc/Pc.Elsie sells homemade lemonade. If she prices a glass of lemonade at $3, she sells 12 glasses a day. If she gives a $0.50 discount (per glass), she can sell 3 more glasses per day. Write a linear demand equation q = mp + b, where p is the price per glass, and q is the number of glasses she can sell per day. Suppose that it costs her 20 cents a glass to make lemonade. There is no fixed cost. Write down the revenue function, cost function, and profit function as functions of p. How much should she charge per glass to maximize her profit? What is the maximum profit?
- Use the Law of Diminishing Marginal Utility to discuss why Market Demand has to have a downward slope. In other words, in order for consumers to demand a higher quantity of an item, its price must fall. Also use the Law of Diminishing Marginal Utility to explain why consumers often prefer to purchase a variety of goods and services (in other words, we are unlikely to fill a grocery cart with many units of the exact same product). Finally, use the utility optimizing condition that the ratio of Marginal Utility to Price for any good has to be the same across all goods to justify why it may be rational behavior to buy an item that is expensive compared to other items. Discuss these concepts using examples from your own experience and observations.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 5Sketch a typical downward sloping demand curve for bagels. What must be true for Bill to purchase additional bagels? Since the marginal utility of the bagel is less than the first, price will need to decrease to induce him to buy the additional bagels. Since the marginal utility of the second bagel is greater than the first, price will need to decrease to induce him to buy the additional bagels. Since the marginal utility of the second bagel is equal to the first, price will need to decrease to induce him to buy the additional bagels. Bill will not purchase additional bagels.
- ou are having lunch at an all-you-can-eat buffet. If you are rational, what should be your marginal utility from the last morsel of food you swallow?Marginal utility from the last morsel of food you swallow should be .Morty's marginal utility from consuming orange juice is 80 utils per ounce and his marginal utility from consuming coffee is 50 utils per ounce. If orange juice costs $0.25 per curice and coffee costs $0.20 per ounce, is Morty maximizing his total utility from the two beverages? At his current level of consumption, Morty receives on coffee. Thus, is Morty maximizing his total utility? utils per dollar spent on orange juice, and he receives (Key in Yes or No) utils per dollar spentImagine, we are in ancient Greece. Praxilla lives in Athens and derives utility from reading poems and from eating cucumbers. Praxilla gets 30 units of marginal utility from her first poem, 27 units of marginal utility from her second poem, 24 units of marginal utility from her third poem, and so on, with marginal utility declining by three units for each additional poem. Praxilla gets six units of marginal utility for each of her first three cucumbers consumed, five units of marginal utility for each of her next three cucumbers consumed, four units of marginal utility for each of the following three cucumbers consumed, and so on, with marginal utility declining by one for every three cucumbers consumed. A poem costs three bronze coins, but a cucumber only costs one bronze coin. Praxilla has 18 bronze coins. 1. Sketch Praxilla’s budget set between poems and cucumbers, placing poems on the vertical axis and cucumbers on the horizontal axis. Start off with the choice of zero poems and 18…