Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 7, Problem 2RQ
To determine
Allocation of spending.
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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?
Table 6.1
Pretzels
Marginal Utility
1
30
20
3
5
4
Refer to Table 6.1, which shows the marginal utility of each additional unit of pretzel for a consumer. The first column of the table shows the number of pretzels consumed in
a day, and the second column of the table shows the marginal utility of each additional unit of pretzel. The total utility derived from the consumption of three pretzels is
units.
O a. 5
O b. 55
Oc. 15
Od. 57
O e. 70
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
Chapter 7 Solutions
Economics (Irwin Economics)
Ch. 7.1 - Prob. 1QQCh. 7.1 - Prob. 2QQCh. 7.1 - Prob. 3QQCh. 7.1 - Prob. 4QQCh. 7.A - Prob. 1ADQCh. 7.A - Prob. 2ADQCh. 7.A - Prob. 3ADQCh. 7.A - Prob. 1ARQCh. 7.A - Prob. 2ARQCh. 7.A - Prob. 1AP
Ch. 7.A - Prob. 2APCh. 7.A - Prob. 3APCh. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQCh. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7P
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- Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.arrow_forwardIf people do not have a complete mental picture of total utility for every level of consumption, how can they find their utility-maximizing consumption choice?arrow_forwardJeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a round—trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.arrow_forward
- 8 of 15 Izzy who consumes only grilled chicken sandwiches and salads with low-fat dressing, has a weekly income of $50. She is currently consuming 5 grilled chicken sandwiches per week, at a price of $6 each, and 2 salads per week, at a price of $10 each. If the last sandwich and the last salad both added 15 units to Izzy's total utility: O A. She is making the utility-maximising choice OB. She should buy more salads and fewer sandwiches OC. She should buy more sandwiches and fewer salads O D. She obtains more additional utility per dollar from salads than from sandwiches Both B and D. O No answer.arrow_forwardTaylor's marginal utility from watching movies and from eating out (in utils) is shown in the accompanying table. Taylor spends exactly $100 every month on these two forms of entertainment; the price of each movie is $10 and the price of each dinner is $20. Movies Marginal Utility Per Month Per Movie 1 2 3 4 Multiple Choice O 4; 6; 2 O 3:2; 6 If Taylor eats out 3 times a month, Taylor will watch O 4; 6; 1/2 60 50 20 O 3; 4; 4 5 Dinners Out Marginal Utility Per Month Per Dinner 1 2 3 4 150 140 120 100 movies, and have marginal utility per dollar of from eating out and a marginal utility per dollar of from going to the movies.arrow_forwardBased on his preferences, Bill is willing to trade 3 movie tickets for 1 ticket to a basketball game. If movie tickets cost $6 each and a ticket to the basketball game costs $16, should Bill trade movie tickets for basketball tickets? Why or why not? Bill should O A. trade movie tickets for basketball tickets because his marginal utility per dollar spent on movie tickets is less than his marginal utility per dollar spent on basketball tickets. O B. trade movie tickets for basketball tickets because his marginal utility per dollar spent on movie tickets is greater than his marginal utility per dollar spent on basketball tickets. O C. trade movie tickets for basketball tickets because his marginal rate of substitution equals the ratio of the price of a basketball ticket to the price of a movie ticket. O D. not trade movie tickets for basketball tickets because his marginal rate of substitution is less than the ratio of the price of a basketball ticket to the price of a movie ticket. O E.…arrow_forward
- A consumer is making purchases of products Alpha and Beta such that the marginal utility of product Alpha is 63 and the marginal utility of product Beta is 40. The price of product Alpha is $9, and the price of product Beta is $5. The utility-maximizing rule suggests that, to stay within a given budget constraint, this consumer should Multiple Choice O O O increase consumption of product Beta and increase consumption of product Alpha. make no change in the consumption of Alpha or Beta. increase consumption of product Beta and decrease consumption of product Alpha. increase consumption of product Alpha and decrease consumption of product Beta.arrow_forwardAmadea spends all her income on pizza,chocolate milk, and music streams. The price of pizza is $4 per slice and price ofchocolate milk $2 per bottle. At Amadea's current consumption level, her marginalutility for pizza is 50 units per slice and for music 100 units per stream. Assuming thatAmadea is a utility maximizer, how much is (a)her current marginal utility for a bottleof chocolate milk, and (b) the price of streams she buys. Show your work. [Hint: Ch 6:Utility-maximizing formula)arrow_forwardRefer to the table below. The consumer has only $16 to spend on X and Y. Px=$2, Py=$4. What is the marginal utility of the 4th unit of Y?* Number of TUX TUy units 1 50 40 80 70 3 100 90 4 110 100 5 115 105 O 50 O 10 100arrow_forward
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