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QUESTION 17 Nathalie has $140 and spends her money on books and pizza. The price of...

QUESTION 17

  1. Nathalie has $140 and spends her money on books and pizza. The price of pizza is $2/slice and the price of books is $10/book. (Pizza and books are unrelated goods.) At these prices, Nathalie chooses to purchase 6 books and 40 slices of pizza.

    1. Draw and label Natalie’s budget constraint. Label the axes, and mark both intercepts. (Suggestion put books on the x-axis)
    2. What is Nathalie’s opportunity cost of purchasing one book?
    3. What is Nathalie’s opportunity cost of purchasing one slice of pizza?
    4. At the point in which she is consuming: What does her MRSbook,pizza Equal?
    1. The on-line retailer YANTZE offers a service YANTZE PRIME, which costs $24 and enables Nathalie to purchase as many books as she would like for $6 each. Would Natalie choose to purchase this new service?
    1. If Natalie subscribes to YANTZE PRIME, she chooses to purchase 8 books and 34 slices of pizza. At this point, what does her MUbook/MUpizza equal equal?

g.     YANTZE offers a newer subscription service, YANTZE double prime, which costs $48 and customers can purchase as many books as they would like for $3 each. Should Nathalie subscribe to YANTZE double prime?

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