Question

Suppose that Frank's utility function for goods ? and ? is ?(?, ?) = 5? +...

Suppose that Frank's utility function for goods ? and ? is ?(?, ?) = 5? + 6?. If ? costs $3/unit and ? costs $7per unit, and Frank budgets $42 to spend on some combination of ? and ?, what is the exact combination of the two goods that maximizes Frank's utility while exactly satisfying his budget constraint? Also, what happens to Frank's utility level if the price of ? rises from $3/unit to $6/unit, while the price of ? falls from $7 per unit to $6 per unit (assume that all else is held constant)?  

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

PLEASC LIKE ME

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Peter consumes two goods, food (F) and clothes (C). His utility function is given by U...
Peter consumes two goods, food (F) and clothes (C). His utility function is given by U (F, C) =FC^2. The price for one unit of food is pF = 1€, while the price for one unit of clothes is pC = 0.5€ and Peter’s income is 120€. A) Which market basket maximizes Peter’s utility under the budget constraint? B) Derive Peter’s individual demand curve of clothes. C) How does Peter’s budget constraint change if the price of clothes increases to...
. Suppose your utility depends on two goods: x and y. The utility function is u(x,...
. Suppose your utility depends on two goods: x and y. The utility function is u(x, y) = ln(x) + ln(y) . Suppose you have an income of $800. Further, assume that the price of x is 8 and the price of y is 10. Write down the equation for the budget constraint. Compute the marginal rate of subsitution between x and y. • Compute the utility maximizing combination of x and y. • Suppose your income increases to $1000...
purchase goldfish and other goods. My tastes are quasilinear in goldfish, and my utility function is...
purchase goldfish and other goods. My tastes are quasilinear in goldfish, and my utility function is U(g, y) = 50 g1/2 + y, where g is goldfish and y is other goods. The price of other goods is $1, and the price of goldfish is $5. My income is $500. At current prices, I purchase 25 goldfish and spend $375 on other goods. Suppose that my income rises to $1,000. What is my new utility-maximizing choice of g and Y?...
The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The...
The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The price of good A is $1, and the price of good B is $2. The income of the consumer is $8. Good A Good B Quantity MUA Quantity MUB 1 10 1 16 2 9 2 14 3 8 3 12 4 7 4 10 5 6 5 8 6 5 6 6 7 4 7 4 If the price of B falls to...
Kim’s utility function is given by U = XY. For this utility function, MUx = Y...
Kim’s utility function is given by U = XY. For this utility function, MUx = Y and MUy = X. If good X costs $6, and good Y costs $3, what share of Kim’s utility-maximizing bundle is made up of good X? Of good Y? If the price of good Y rises to $4, what happens to the shares of X and Y in Kim’s utility-maximizing bundle?
Suppose that the price of Good 1 falls to $5 while everything else stays the same,...
Suppose that the price of Good 1 falls to $5 while everything else stays the same, you have an income of $40 to spend on two goods. Good 2 costs $5 as well. (a) Write down an equation for your budget constraint. (b) What is the slope of the budget line when the price of Good 1 and Good 2 are both $5 and your income is $40? (c) Say that the price of Good 1 and Good 2 are...
Question 1 The line that connects the combinations of goods that leave you indifferent is called:...
Question 1 The line that connects the combinations of goods that leave you indifferent is called: Select one: a. the indifference curve. b. the budget constraint. c. the indifference constraint. d. the indifference line. Question 2 An increase in income will cause: Select one: a. the budget constraint to become flatter, so that it includes more combinations. b. the budget constraint to become steeper, so that it includes more combinations. c. a parallel shift inward of the budget constraint. d....
A person’s utility from goods A and B is U(A, B) = A⋅B. The marginal utilities...
A person’s utility from goods A and B is U(A, B) = A⋅B. The marginal utilities of each good are MUA = B and MUB = A. The person has $120 income to spend on the two goods and the price of both goods equals $1. e)   A tax of $1 per-unit is placed on A (i.e., increases price of A to $2). Find the new utility maximizing amounts of A and B. Show your answers graphically. f)   How much...
Suppose the following model of government efficiency. Utility function over consumption of private goods (C) and...
Suppose the following model of government efficiency. Utility function over consumption of private goods (C) and public goods (G) U(C,L) = C^0.5G^0.5 Exogenous Income: Y = 50 Lump-sum tax: T Budget constraint: C + T = Y PPF: C = Y – G/q Government efficiency: q = 0.8 (This measures the number of public goods that can be produced from one unit of private consumption good) We want to maximize the representative consumer’s utility and balance the government budget. Find...
Suppose the consumer’s utility function is equal to U=3x+5y. Currently the price of x is $5,...
Suppose the consumer’s utility function is equal to U=3x+5y. Currently the price of x is $5, the price of y is $15 and the income the consumer has to spend on these goods is $100. A) Determine the MRSyx if we consume the bundle of (X,Y) = (1,2). B) What if we consume the bundle of (50,2). C) What is the opportunity cost of X in terms of Y? D) What quantities of X and Y should this consumer consume...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT