Hi ples help me with this problem. Thanks 1. Marta drinks three cups of coffee a

Question

Hi ples help me with this problem. Thanks

1. Marta drinks three cups of coffee a day, for which she has diminishing marginal utility. Which of

her three cups generates the greatest increase in total utility? Which generates the least?

a. Answer with arrow up or down: Jamal consumes harps (horizontal axis) and violins (vertical axis).

As he moves downward along the budget line, the quantity of harps __________, the quantity of violins

___________, marginal utility of harps _________, and the marginal utility of violins __________.

revised 2016-05-01 2:12 PM

b. In the following two examples, find all the consumption bundles that lie on the consumer’s budget

line. Illustrate these consumption possibilities in a diagram and draw the budget line through them.

c. The consumption bundle consists of movie tickets and buckets of popcorn. The price of each ticket is

$10.00, the price of each bucket of popcorn is $5.00, and the consumer’s income is $20.00. In your

diagram, put movie tickets on the vertical axis and buckets of popcorn on the horizontal axis.

d. The consumption bundle consists of underwear and socks. The price of each pair of underwear is

$4.00, the price of each pair of socks is $2.00, and the consumer’s income is $12.00. In your diagram, put

pairs of socks on the vertical axis and pairs of underwear on the horizontal axis.

e. Bruno can spend his income on two different goods: Beyoncé MP3s and notebooks for his class

notes. For each of the following three situations, decide if the given consumption bundle is within

Bruno’s consumption possibilities. Then decide if it lies on the budget line or not.

f. MP3s cost $2 each, and notebooks cost $3 each. Bruno has income of $60. He is considering a

consumption bundle containing 15 MP3s and 10 notebooks.

g. MP3s cost $2 each, and notebooks cost $5 each. Bruno has income of $110. He is considering a

consumption bundle containing 20 MP3s and 10 notebooks.

h. MP3s cost $3 each, and notebooks cost $10 each. Bruno has income of $50. He is considering a

consumption bundle containing 10 MP3s and 3 notebooks.

i. Elena is consuming the utility-maximizing combination of MP3 tunes and paintball sessions. The

price of MP3 tunes is $1 and the price of paintball sessions is $6. The marginal utility of MP3 tunes is 4.

The marginal utility of paintball sessions is __________.

j. Suppose a consumer has a fixed amount to spend each week on iTunes songs ($1 each) and movies

($6 each). For the combination she chose this week, the marginal utility of movies is 30 and the marginal

utility of songs is 3. For next week she should_______ (increase/decrease) the number of songs and

_______ (increase/decrease) the number of movies.

k. Dirk spends $20 each week on muffins (price = $2) and bagels (price = $1). This week he bought

four muffins and ______ bagels. The marginal utility of muffins is 30 utils and the marginal utility of

bagels is 10 utils. Dirk would have reached a higher utility level by purchasing ________ (more/fewer)

muffins and ______ (more/fewer) bagels.

Explanation / Answer

Q1. Marta drinks 3 cups of coffee a day. She has diminishing marginal utility for these. Diminishing marginal utility implies that the increase in total utility she gets from consumption of cup of coffee goes on declining as she increases her consumption of coffee.

So, first cup will generate the greatest increase in total utility and third cup will generate the least increase in total utility.

Q2. As Jamal will move downward along his budget line, the quantity of harps will increase, the quantity of violins will decrease, marginal utility of harps will decrease, and the marginal utility of violins will increase.

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