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Every day, Josie buys 1 bottle of water and 1 salad for lunch. The price of a bottle of water is $1.25 and the price of a salad is $3.75. Josie's choice of lunch maximizes her total utility, and she spends only $5.00 on lunch. What do we know about Josie's marginal utility from bottled water?
0.333 times her marginal utility from salad
Tim buys 7 smoothies and sees 6 movies a week when he has $111 to spend, the price of a movie is $15, and the price of a smoothie is $3. What is the relative price of a movie ticket? If the price of a movie ticket falls to $7.50, how do Tim's consumption possibilities change? The relative price of a movie ticket is _______. If the price of a movie ticket falls to $7.50, Tim's consumption possibilities _______.
5 smoothies; expand
Nick has $24.00 a week to spend on cookies and donuts. The price of a bag of cookies is $2.00 and the price of a box of donuts is $1.00. Can Nick afford to buy 12 boxes of donuts and 4 bags of cookies? Can Nick afford to buy 16 boxes of donuts and 6 bags of cookies? What is the relative price of a bag of cookies? Draw Nick's budget line and label it.
GRAPH POINT RISE OVER RUN (0,12)to(24,0) - the graph line should be going down hills QUANTIty or y axis -12 to 0 Nick can afford to buy 12 boxes of donuts and 4 bags of cookies. TRUE Nick can afford to buy 16 boxes of donuts and 6 bags of cookies. FALSE The relative price of a bag of cookies is 2 boxes of donuts
Roger has $12.00 a week to spend on cookies and donuts. The price of a bag of cookies is $2.00, the price of a box of donuts is $1.00. Suppose the price of a box of donuts remains at $1.00 but the price of a bag of cookies rises to $3.00. Draw Roger's budget line after the price rise. Label it.
GRAPH POINT ((0,4) to (0,12) NEE BUDGET LINE If Roger buys 6 boxes of donuts, what is the maximum number of bags of cookies he can buy after the price of a bag of cookies rises to $3.00? Roger can buy 2 bags of cookies a week. Has the relative price of a bag of cookies changed? 3 boxes of donuts When the price of a bag of cookies rises to $3.00, the relative price of a box of donuts increases. Decreases
The table shows the marginal utility that Ali gets from smoothies and movies. Ali has $30 a week to spend. The price of a movie ticket is $6 and the price of a smoothie is $3. If Ali buys 4 smoothies a week and sees 3 movies, does he spend all $30? What is his utility from smoothies and his utility from movies? Does he maximize his utility? if not, which good must he buy more of? Quantity (per day) Marginal utility from smoothies movies 1 7 30 2 6 24 3 5 18 4 4 12 5 3 6 6 2 0
If Ali buys 4 smoothies a week and sees 3 movies, he does spend all of his $30. His total utility from smoothies is 22units and his total utility from movies is 72units. Ali is _______. not maximizing his utility so he needs to see more movies and buy fewer smoothies
The table shows Ben's utility from waffles. Would Ben ever want to buy more than one plate of waffles a day or no waffles? Ben will buy more than one plate a day if _______. Waffle(plates per day)-0,1,2,3,4,5 Total utility- 0,28,48,60,68,72 Marginal utility- 28,20,12,8,4 TWO PART QUESTION
PART A his marginal utility per dollar from the first plate of waffles is greater than the marginal utility per dollar from all the other goods he consumes PART B his marginal utility per dollar from the first plate is less than his marginal utility per dollar from the other goods and services he buys
When Erin has $25 to spend, she sees 2 movies at $10 a movie ticket and buys 1 six-pack of soda. What is the price of soda? If her budget for soda and movies increase to $50, what is the change in the relative price of a movie ticket? How does her marginal utility per dollar from movies change?
The price of a six-pack of soda is $5 If Erin's budget increases and she has $50 to spend on soda and movie tickets, the relative price of a movie ticket _______. DOES NOT CHANGE If Erin's budget increases, the marginal utility per dollar from movies _______. DECREASES
Compared to other liquids, gasoline is cheap In 2008, when gasoline hit $4 a gallon, motorists complained, but they didn't complain about $18 for 16 ml of HP ink ($4,294.58 per gallon). Source: The New York Times, May 27, 2008 Why might the prices of printer ink and gasoline provide an example of the paradox of value? The paradox of value explains that a gallon of gasoline has _______ and a gallon of printer ink has _______.
a low price and a low marginal utility; a high price and a high marginal utility
Susie spends $28 a week on sundaes and magazines. The price of a sundae is $4 and the price of a magazine is $4. The table shows Susie's marginal utility from sundaes and magazines. How many sundaes does she buy? If the price of a sundae doubles to $8 and other things remain the same, how many sundaes will she buy? What are two points on her demand curve for sundaes? Sundaes Magazines Quantity per week Marginal utility Quantity per week Marginal utility 1 60 1 40 2 56 2 32 3 50 3 28 4 42 4 25 5 32 5 23 6 20 6 22
When the price of a sundae is $4, Susie buys 5 sundaes. When the price of a sundae is $8, Susie buys 2 sundaes. Two points on Susie's demand curve for sundaes are _______ sundaes demanded at a price of $4 and _______ sundaes demanded at price of $8. 5; 2
Jim spends all his income on apartment rent, food, clothing, and vacations. He gets a pay raise from $3,000 a month to $4,000 a month. At the same time, airfares and other vacation-related expenses increase by 50 percent. How has Jim's budget in terms of airfares and other vacation-related expenses changed? Is Jim better off or worse off in his new situation? Jim's real income in terms of airfares and other vacation-related expenses _______. Jim is _______.
decreases; either better or worse off depending on how he allocates his budget
The table shows Kent's total utility from salads and pizzas. When the price of a salad is $4, the price of a pizza is $5, and Kent has $28 a week to spend, he buys 2 salads and 4 pizzas. Does Kent maximize his total utility? Kent _______ maximize his total utility because his _______. Salads Pizzas Quantity per week Total utility Quantity per week Total utility 0 0 0 0 1 14 1 24 2 26 2 45 3 36 3 63 4 42 4 78 5 46 5 90 6 48 6 99
does; marginal utility per dollar from salads and pizzas is equal
Read Eye on Song Downloads and Streaming in the eText or click on the icon LOADING... to open a copy. Now use the following information to answer the questions: In 2018, Americans downloaded 400 million singles at $1.20 each and 50 million albums at $10 each. They also bought 52 million albums on CDs at $13 each and 50 million streaming subscriptions at $94 each. What does marginal utility theory tell you about the marginal utility of a single download, an album download, an album on a CD, a streaming subscription, and a song streamed? When utility is maximized, the marginal utility from a music format is _______.
greater the higher its price the ratio of the marginal utility from a streaming subscription to the marginal utility from albums on CDs is 7.2
Apple Music Offering Six-Month Free Trial to Students Students can now get a six-month free trial, and when the trial ends, the Apple Music plan for students is $4.99 per month, below the $9.99 per month for others. Source: MacRumors, July 9, 2019 Lucy is a student and her trial is about to end. How will she decide whether to continue with the Apple Music plan or end it? Lucy will decide to _______.
keep the Apple Music plan or end it, whichever decision maximizes her total utility
Watch video without dinging data caps Verizon, the biggest wireless company, will let its customers watch ad-sponsored video free from data caps. Source: Associated Press, December 15, 2015 What is the effect of exempting video from data caps on a person's budget line and the quantities of video and other data used? Exempting video from data caps is a way of lowering the price of watching a video, so a person's budget line will _______.
rotate outward When Verizon exempts ad-sponsored video from data caps, the marginal utility per dollar from videos will initially _______ the marginal utility per dollar from other data, so consumers will watch _______. exceed; more videos and use less other data
The table shows Kent's total utility from burritos and hot dogs. When Kent buys 6 burritos and 6 hot dogs, what is his total utility and his marginal utility from the sixth burrito? If the price of a burrito is $2, what is his marginal utility per dollar from burritos? Burritos Hot dogs Quantity per week Total utility Quantity per week Total utility 0 0 0 0 1 28 1 48 2 52 2 90 3 72 3 126 4 84 4 156 5 92 5 180 6 96 6 198
total utility when he buys 6 burritos and 6 hot dogs is 294 units. Kent's marginal utility from the sixth burrito is 4 units. If the price of a burrito is $2, then the marginal utility per dollar from burritos when Kent buys 6 burritos is 2 units per dollar.