1. Use the total utility (TU) data for individual X to calculate the value (numb
ID: 1100627 • Letter: 1
Question
1. Use the total utility (TU) data for individual X to calculate the value (number of utils of satisfaction) that X will get from her/his 7th hour of sleep and 8th hour of sleep.
The MU of X's 7th hour of sleep is ___ utils, and
the MU of X's 8th hour of sleep is ___ utils.
To answer, use whole numbers separated by a comma but no spaces. For example: 8,6
2. When X has only 12 hours per day to devote to sleep or leisure, the optimal hours per day of
sleep = __
leisure = __
Again, answer with two whole numbers separated only by a comma.
3.When X has only 12 hours per day to devote to sleep or leisure, the maximum TU achievable is _____ utils.
4.Now, if X's other obligations decrease, leaving 14 hours per day to devote between sleep and leisure, the maximum utility can be attained when sleep and leisure are consumed in the following amounts:
Hours of sleep per day = ____
Hours of leisure per day = ____
5.When X has 14 hours to devote to sleep and leisure, the maximum TU achievable is _____ utils.
6. The remaining questions on this quiz pertain to producer decision-making, but involve the same basic logic. The objective is to maximize total production (TP), (or "sales" in this example) -under a certain budget constraint. This time the constraint is financial, and the only two competing inputs that contribute to sales are television ads (input A) and radio ads (input B).
Notice that the data are the same as before, but go by different names. Instead of making decisions by way of comparing MU, you'll now make the same decisions by comparing MP: marginal product, or the number of additional lottery tickets sold as the result of airing one more ad each day. Use the data provided with the link below to answer the remaining questions.
Begin by assuming that the advertising budget is $6000 per day and that the cost of a TV ad = the cost of a radio ad = $500. Basically, this means that $6000 = [Q(TV ads) + Q(radio ads)]x $500, or dividing by 500,
12 =Q(TV ads) + Q(radio ads)
For those of you who prefer English, the total number of ads each day will be 12 (or less) if we stay within our budget.
Under these conditions, the optimal composition of ads will be:
___ TV ads each day and
___ Radio ads each day.
[Again, the answer should be expressed as two whole numbers separated only by a comma]
7. Under the conditions laid out in question #6, sales of lottery tickets can total as high as _____ thousand tickets per day. [Note the similarity to question #3]
8. If the advertising budget now increases to $7000 with the two inputs to sales (radio and TV ads) remaining at $500 each, the optimal quantities of them would now be....
____ TV ads per day, and
____ Radio ads per day.
9. Now assume that the budget is back to only $6000 per day, but that the prices of the inputs (the two different types of ads) are no longer the same. Assume now that TV ads increase to $600 each, and that radio ads sell for only $300 each. Your logic now must take into account these different prices by comparing "bang for the buck", or MP per the price of each input.
The new optimal combination of TV ads to Radio ads for maximizing ticket sales under this budget constrant is:
____ TV ads per day, and
____ Radio ads per day.
Explanation / Answer
1. The MU of X's 7th hour of sleep is 3 utils, and the MU of X's 8th hour of sleep is 1 utils.
2. sleep = 7 hours; leisure = 5 hours
3. 179 utils
4. Hours of sleep per day = 8; Hours of leisure per day = 6
5. 181 utils
6. 7 TV ads each day and 5 Radio ads each day
7. 179 thousand
8. 8 TV ads each day and 6 Radio ads each day
9. 7 TV ads each day and 6 Radio ads each day
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