Quantity of pita wraps Total utility Quantity of Bubble teas Total Utility 1 60 1 40 2 102 2 70 3 132 3 91 4 144 4 106 5 144 5 112 6 138 6 115 7 128 7 115
Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3. The table above shows his total utility from different quantities of the two items.
a) What is Keegan's optimal consumption bundle?
b) What is Keegan's marginal utility per dollar spent on the third pita wrap?
c) If Keegan can drink all the bubble tea he wants for free, how many glasses will he consume?
2. Suppose Joe is maximizing total utility within his budget constraint. If the price of the last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is $20, then, using the rule of equal marginal utility per dollar spent, how much extra satisfaction must Joe receive from the last shirt?
3. Popular rock band U2 regularly sells out its concerts, charging $80 for its tickets. They could raise ticket prices to $120 and still sell out their concerts, but choose not to do so. What is the best economic explanation for this decision?
Quantity of pita wraps | Total utility | Quantity of Bubble teas | Total Utility |
1 | 60 | 1 | 40 |
2 | 102 | 2 | 70 |
3 | 132 | 3 | 91 |
4 | 144 | 4 | 106 |
5 | 144 | 5 | 112 |
6 | 138 | 6 | 115 |
7 | 128 | 7 | 115 |
Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3. The table above shows his total utility from different quantities of the two items.
a) What is Keegan's optimal consumption bundle?
b) What is Keegan's marginal utility per dollar spent on the third pita wrap?
c) If Keegan can drink all the bubble tea he wants for free, how many glasses will he consume?
2. Suppose Joe is maximizing total utility within his budget constraint. If the price of the last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is $20, then, using the rule of equal marginal utility per dollar spent, how much extra satisfaction must Joe receive from the last shirt?
3. Popular rock band U2 regularly sells out its concerts, charging $80 for its tickets. They could raise ticket prices to $120 and still sell out their concerts, but choose not to do so. What is the best economic explanation for this decision?
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3. Amy is shopping at a dollar store. She is currently buying 5 bracelets that cost $1 each and 4 sodas that cost $1 each. The table below indicates the marginal utility she obtains when she purchases this combination.
Quantity | Price per Unit | MU per unit | |
Bracelets | 5 | $1 | 30 |
Sodas | 4 | $1 | 40 |
A consumer maximizes utility when the last dollar spent on any good generates the same satisfaction as the last dollar spent on every other good. Is this consumer maximizing her utility?
If not, should she consume more bracelets or more sodas? Explain.
Answer the following assuming that one more bracelet is purchased and one less soda is consumed:
Recall the law of diminishing marginal utility. What happens to the Marginal Utility of bracelets and the Marginal Utility of soda?
What happens to the Total Utility received?
What happens to the total dollars spent?
Michael spends all of his income on coffee and donuts. A coffee costs $2.50 and a donut costs $2.00. At his current consumption level, the marginal utility for coffee is 30 utils, and the marginal utility for a donut is 60 utils. Which statement best describes what Michael needs to do to maximize his utility?
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Question 2
What is it called when the marginal utility derived from the last dollar spent on each good is the same across all goods and the last dollar spent uses all of the available budget for the purchase of those goods?
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Question 3 (1 point)
What does the economic theory of marginal utility infer?
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Question 4
Kate is addicted to chocolate and does not care how much it costs. In fact, she spends more than $20 a week on chocolate. What can be concluded about elasticity in her buying decisions?
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Question 5 (1 point)
Why does the demand for a good become relatively more elastic?
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Question 6 (1 point)
Assume the price of chicken per pound is $3.49 and that Americans purchase 10 million pounds per chicken every month. If the price of chicken increases to $5.49 per pound, identify what will occur to consumer surplus?
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Question 7 (1 point)
What is another name for the difference between the price that consumers are willing to pay for a good and a lower price that they may actually have to pay?
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Question 8
Adam, Brian, Robert, and Sam all want to attend a football game. The admission price is $48. Adam is willing to pay $59 for the ticket. Brian is willing to pay $39. Robert is willing to pay $45, and Sam is willing to pay $55. Based on this information, who will go to the game?
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Question 9 (1 point)
Lily is willing to pay $10 for one bracelet and $5 for a second. Patty is willing to pay $12 for one bracelet and $2 for a second. If the price is currently $8 per bracelet, identify what is the total consumer surplus after Lily and Patty make their purchases?
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Question 10 (1 point)
Manfred is willing to shovel one driveway for $25, a second for $30, and a third for $35. Assume that the market rate for shoveling driveways is $32. How many driveways will Manfred shovel, what will be his total revenue, and what will be his producer surplus?
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Question 11 (1 point)
What would the difference between the price that producers receive and the lower price at which they are willing to sell the good be called?
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Question 12 (1 point)
What will happen when there is an increase in the price of eBook downloads?
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Question 13 (1 point)
When is price elasticity of demand utilized to measure how an individual changes the quantity they demand?
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Question 14 (1 point)
Assume Mary consumes only tea and pastries. A cup of tea costs 5 euros and a pastry costs 8 euros. Her weekly income is 450 euros. Mary always drinks 2 cups of tea for every pastry she consumes. What is MaryΓ’ΒΒs optimal weekly consumption bundle?
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Question 15 (1 point)
When is producer surplus a positive value?
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