Homework Answers
Answer:
The utility maximizing consumption decision states that the consumers decided to allocate their money incomes so that the last dollar spent on each product purchased yields the same amount of extra marginal utility. The basic utility maximizing condition is MU1/P1 = MU2 / P2. So, Part b. is True. Also the Marginal rate of substitution(MRS) is also equal to MU1/MU2 . So also c. part is also correct as it is also same as part b after transformation. Now, the Marginal rate of substitution of good 1 for good 2 is equal to ∆2/∆1. So the option a is also correct by transforming the a part. So the correct option is d that is False.
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11. If a consumer makes utility-maximizing consumption decision between banana and apple, which of the following...
1) If a consumer is currently maximizing her satisfaction, what will happen to the marginal utility...
1) If a consumer is currently maximizing her satisfaction, what will happen to the marginal utility of a good when its price increases? The marginal utility will____ a. Increase, because the consumer will decrease her consumption of the good b. Decrease, because the consumer will increase her consumption of the good c. Decrease, because the consumer will decrease her consumption of the good d. Increase, because the consumer will increase her consumption of the good 2) the fixed cost of...
Marginal utility is a. the relative value of two goods when a utility-maximizing decision has been...
Marginal utility is a. the relative value of two goods when a utility-maximizing decision has been made. b. change in total utility that results from increasing the amount of a good consumed by one unit. c. change in the amount of a good consumed that increases total utility by one unit. d. utility obtained from the consumption of all but the last unit of a good.
2. Mike's preferences are represented by the utility function U(A, B)- A+2B. He has an income...
2. Mike's preferences are represented by the utility function U(A, B)- A+2B. He has an income of $20. Consider each of the following combination of prices of goods. On the same graph, (i) graph a family of indifference curves for the consumer, (ii) graph the budget lines for each combination of prices, (iii) calculate and label the optimal consumption choice(s) for each combination of prices, and (iv) calculate the utility Mike derives from consuming the optimal consumption choice bananas (a)...
2. Mike's preferences are represented by the utility function U(A, B) A+2B. He has an income...
2. Mike's preferences are represented by the utility function U(A, B) A+2B. He has an income of $20. Consider each of the following combination of prices of goods. On the same graph, (i) graph a family of indifference curves for the consumer, (ü) graph the budget lines for each combination of prices, (i cakculate and label the optimal consumption choice(s) for each combination of prices, and (iv) cakulate the utility Mike derives from consuming the optimal consumption choice. bananas 20...
2. Mike's preferences are represented by the utility function U(A, B) A+2B. He has an income...
2. Mike's preferences are represented by the utility function U(A, B) A+2B. He has an income of S20. Consider each of the following combination of prices of goods. On the same graph, (i) graph a family of indifference curves for the consumer, (ii) graph the budget lines for each combination of prices, (iii) calculate and label the optimal consumption choice(s) for each combination of prices, and (iv) calculate the utility Mike derives from consuming the optimal consumption choice. bananas 20...
Consider a consumer who lives for two periods. The consumer gets utility from consumption in each...
Consider a consumer who lives for two periods. The consumer gets utility from consumption in each period. The consumer also gets an endowment of time in each period, L hours, which the consumer can use to work or consume as leisure . The consumer gets NO utility from leisure, however. There is no borrowing or lending. (a)(10%) Let w1 and w2 be the wage rates per hour in periods 1 and periods 2 respect- ively. In period 1, the consumer...
2 . 8) Diminishing marginal utility means that A) marginal utility decreases as consumption decreases. B)...
2 . 8) Diminishing marginal utility means that A) marginal utility decreases as consumption decreases. B) marginal utility increases as consumption increases. C) marginal utility decreases as consumption increases. D) total utility decreases as marginal utility decreases E) total utility decreases as marginal utility increases. 9) Which of the following is the best example of how the invisible hands works? A) The government places restrictions on prices of products, B) The government decides to force firms to produce more electricity....
Given the budget constraint in the diagram, which of the following statements is false? O Consumption...
Given the budget constraint in the diagram, which of the following statements is false? O Consumption bundles b and c yield the same level of utility, which is higher than the utility represented by bundle a. The consumer's optimal bundle could be bundle d, e, or f. Although the consumer receives the same level of utility from bundles d and e, she cannot afford to purchase bundled The consumer receives the same level of utility from consumption bundles d, e,...
Suppose there are two consumption goods and preferences of a consumer can be represented by the following utility functi...
Suppose there are two consumption goods and preferences of a
consumer can be represented by the following utility function:
;
a) Derive the Marshallian demand function of this consumer.
b) Calculate and intuitively interpret the elasticity of
substitution.
d/11027(0 - 1) + 10) = (2x Iz)n (0<a <1:0 +p<1)
1. Consider the following two period consumption savings problem. A consumer cares about consumption (c and...
1. Consider the following two period consumption savings problem. A consumer cares about consumption (c and future consumption c according to Assume that U(c) is given by for some constant y. In the present the consumer chooses how much to consume and how much to save out of her income y>0 This decision is made in the knowledge that in the future she will be retired, have no income, and thus future consumption will be entirely out of savings: c)a,...
2. Mike's preferences are represented by the utility function U(A, B)- A+2B. He has an income of $20. Consider each of the following combination of prices of goods. On the same graph, (i) graph a family of indifference curves for the consumer, (ii) graph the budget lines for each combination of prices, (iii) calculate and label the optimal consumption choice(s) for each combination of prices, and (iv) calculate the utility Mike derives from consuming the optimal consumption choice bananas (a)...
2. Mike's preferences are represented by the utility function U(A, B) A+2B. He has an income of $20. Consider each of the following combination of prices of goods. On the same graph, (i) graph a family of indifference curves for the consumer, (ü) graph the budget lines for each combination of prices, (i cakculate and label the optimal consumption choice(s) for each combination of prices, and (iv) cakulate the utility Mike derives from consuming the optimal consumption choice. bananas 20...
2. Mike's preferences are represented by the utility function U(A, B) A+2B. He has an income of S20. Consider each of the following combination of prices of goods. On the same graph, (i) graph a family of indifference curves for the consumer, (ii) graph the budget lines for each combination of prices, (iii) calculate and label the optimal consumption choice(s) for each combination of prices, and (iv) calculate the utility Mike derives from consuming the optimal consumption choice. bananas 20...
2 . 8) Diminishing marginal utility means that A) marginal utility decreases as consumption decreases. B) marginal utility increases as consumption increases. C) marginal utility decreases as consumption increases. D) total utility decreases as marginal utility decreases E) total utility decreases as marginal utility increases. 9) Which of the following is the best example of how the invisible hands works? A) The government places restrictions on prices of products, B) The government decides to force firms to produce more electricity....
Given the budget constraint in the diagram, which of the following statements is false? O Consumption bundles b and c yield the same level of utility, which is higher than the utility represented by bundle a. The consumer's optimal bundle could be bundle d, e, or f. Although the consumer receives the same level of utility from bundles d and e, she cannot afford to purchase bundled The consumer receives the same level of utility from consumption bundles d, e,...
Suppose there are two consumption goods and preferences of a
consumer can be represented by the following utility function:
;
a) Derive the Marshallian demand function of this consumer.
b) Calculate and intuitively interpret the elasticity of
substitution.
d/11027(0 - 1) + 10) = (2x Iz)n (0<a <1:0 +p<1)
1. Consider the following two period consumption savings problem. A consumer cares about consumption (c and future consumption c according to Assume that U(c) is given by for some constant y. In the present the consumer chooses how much to consume and how much to save out of her income y>0 This decision is made in the knowledge that in the future she will be retired, have no income, and thus future consumption will be entirely out of savings: c)a,...
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