Question

1. Suppose that Cathy consumes two goods: beef (b) and cabbage (c). Her utility function is U = b^1/3 c^2/3 . The price of beef is $9/lb and the price of cabbage is $3/lb. Cathy has $72. (a) What is Cathy’s MRSb,c for any value of b and c? (b) What is Cathy’s budget constraint? (c) What is Cathy’s optimal consumption bundle?

Answer #1

Dominique only consumes two goods –
coffee and French pastries. Her utility function
is U (P,C) = P 0.75 C
0.25, with P being the number of French pastries she
consumes and C being the number of cups of coffee she consumes each
week. She has $ 32 to allocate on pastries and coffee per week.
Note that this is an example of a Cobb-Douglas utility
function.
The price of the French pastries is $ 4.00 each, while the
price...

Chester consumes only bread (b) and cheese (c); his utility
function is U(b,c) = bc. In Chester’s town, cheese is sold in an
unusual way. The more cheese you buy, the higher the price you have
to pay. In particular, c units of cheese cost Chester c2 dollars.
Bread is sold in the usual way (i.e., at a constant price) and the
per-unit price of bread is pb > 0. Chester’s income is m
dollars.
(a) Write down Chester’s budget...

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...

Cleopatra spends all her money on bags (B) and shoes (S). Her
utility function is U(B, S) = 2B0.5S 0.5 . Her income is $150.
Price of shoes is pS = 2. Price of bags depends on the number of
bags purchased. Bags cost $5 each if she purchases between 1 and 8
bags. If she purchases more than 8 bags, the price falls to $2 for
all subsequent books.
(a) Draw Kleopatra's budget constraint where bag is on the...

7.
Suppose you have the following utility function for two
goods:
u(x1, x2) = x
1/3
1 x
2/3
2
. Suppose your initial income is I, and prices are p1 and
p2.
(a) Suppose I = 400, p1 = 2.5, and p2 = 5. Solve for the
optimal bundle. Graph the budget
constraint with x1 on the horizontal axis, and the
indifference curve for that bundle.
Label all relevant points
(b) Suppose I = 600, p1 = 2.5, and...

Imran consumes two goods, X1 and X2. his
utility function takes the form: u(X1, X2)=
4(X1)^3+3(X2)^5. The price of X1
is Rs. 2 and the price of X2 is Rs. 4. Imran has
allocated Rs. 1000 for the consumption of these two goods.
(a) Fine the optimal bundle of these two goods that Imran would
consume if he wants to maximize his utility. Note: write bundles in
integers instead of decimals.
(b) What is Imran's expenditure on X1? On
X2?...

[Utility Maximization] Mary spends her income on housing (H) and
food (F). Her utility function is given by: U(H, F) = 3HF − H + F
Suppose the price of food is $1 per unit and the price of housing
is $2 per unit. Assume her income is $9.
a) Write down Mary’s budget constraint and find the expression
for her marginal rate of substitution (MRS(HF)).
b) Assume the optimal choice of (H*,F*) is not a corner
solution. Write the...

3. Nora enjoys fish (F) and chips(C). Her utility function is
U(C, F) = 2CF. Her income is B per month. The price of fish is
PF and the price of chips is PC. Place fish
on the horizontal axis and chips on the vertical axis in the
diagrams involving indifference curves and budget lines.
(a) What is the equation for Nora’s budget line?
(b) The marginal utility of fish is MUF = 2C and the
Marginal utility of chips...

A consumer purchases two goods, food (F) and clothing (C). Her
utility function is given by U(F,C)=FC+F. The marginal utilities
are MUF=C+1 and MUC=F. The price of food is PF, the price of
clothing is PC, and the consumer’s income is W. Suppose W=10, PF=4,
PC=6. What is the optimal bundle?
Group of answer choices
(F,C)=(1/3,1)
(F,C)=(2,1)
(F,C)=(2,1/3)
(F,C)=(1,3)

1. Sarah enjoys watching films at home (F) and
going to the cinema (C). Her utility function is U = FC. Each film
costs £2 to download while each cinema ticket costs £8, and Sarah
has £80 to spend each month on these two goods.
Does Sarah's utility function satisfy the assumption that more
is preferred to less? Explain.
Write the expression for Sarah's budget constraint. Graph the
budget constraint and determine its slope.
Suppose Sarah is currently downloading 28...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 5 minutes ago

asked 6 minutes ago

asked 13 minutes ago

asked 19 minutes ago

asked 24 minutes ago

asked 24 minutes ago

asked 24 minutes ago

asked 24 minutes ago

asked 27 minutes ago

asked 28 minutes ago

asked 31 minutes ago