Question

2. (10 pts) Alvin is an avid mountaineer who enjoys climbing the peaks near his house in Boulder, Colorado. For Alvin, climbing trips are a good: more trips spent climbing are preferred to less. The State Park where Alvin climbs charges an annual fee of $100. To climb there at all, Alvin must pay the fee. Once he has paid the fee, he can climb as much as he wants. (a) Draw Alvin's budget constraint, placing "dollars on other stuff" on the y axis. Note: be careful to label your axes and intercepts. (b) If Alvin chooses the number of climbing trips to maximize his utility, what will the marginal rate of substitution between "other stuff" and climbing trips be?

Answer 1