30. (2 pts) Why would an ounce of gold be priced higher than an ounce of coffee

Question

30. (2 pts) Why would an ounce of gold be priced higher than an ounce of coffee beans, even though coffee is generally considered more essential than gold? Explain the paradox in terms of marginal and total utility The basic reason is that the gold is relatively (scarce, abundant), and it has a high price. Coffee is relatively ( scarce, abundant ), and has a low price. The utility-maximizing rule indicates that consumers should continue purchasing any product until the ratio of its marginal utility price is equal to that for all other products. Gold must have a ( low, high) marginal utility and price, while coffee must have a (low, high) marginal utility and price for consumers to maximize utility. Consumers, however, generally purchase only small quantities of gold because of the high price, and large quantities of coffee because of the low price. Coffee is considered to be more essential than gold, even though its price is lower, because the total utility from consuming coffee (sum of the marginal utilities) is much (greater, smaller) than the total utility from consuming gold 31. (2 pts) A person has a basic choice between eating meals at home and eating meals in a restaurant. The cost of the food that is eaten at home is $10 per meal. The cost of a restaurant meal is S20. It takes two hours to eat a meal at home (including preparation time and cleanup time) hour of time to eat a meal in a restaurant. The marginal utilities of the home meal and the restaurant meal are the same. The person values time at $12 per hour. What does the theory of consumer behavior suggest the rational consumer will decide to do: eat at home or in a restaurant? Answer first excluding the value of time from the decision. Then include the value of time in the decision. Follow the questions below by choosing choices in the parenthesis . It takes one If time is not a consideration in the cost of a meal, then the marginal utility per dollar of a meal at home is (greater, smaller) than the marginal utility per dollar of the restaurant meal (M$10 MUr s20) The consumer will eat meals at home If, however, the value of time is included in the cost of a meal, then the marginal utility per dollar spent will be the (greater, smaller) for restaurant meals than home meals. The full cost of a home meal is s__ ($10 food plus $24 in time). The full cost of the restaurant meal is $ time). Since the marginal utility of restaurant and home meals are the same, the marginal utility per dollar of restaurant meals will be (greater, smaller) than the marginal utility per dollar of home meals when the value of time enters the calculation (MUh/S32 > MUr/S34) ($20 in food and $12in

Explanation / Answer

30). a). scarce

b). abundant

c). low

d). high

e). greater

31).

a). Greater

b). Greater for restaurant

c). $10 food plus $24 time

d). $12 food plus $12 time

e), Smaller

  

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.