QUESTION 13 1. Table B Budget = 10 Price =2 Price =1 Total Marginal Total Margin
ID: 1223253 • Letter: Q
Question
QUESTION 13
1. Table B
Budget = 10
Price
=2
Price
=1
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
0
1
500
1
100
2
900
2
190
3
1200
3
260
4
1380
4
300
5
1500
5
320
6
1580
6
330
7
1650
7
335
8
1700
8
338
9
1720
9
339
10
1730
10
340
2.
If the price of widgets rises to $2 and the price of zercs remains at $1, the utility maximizing combination of widgets and zercs is widgets and zercs. (Enter a whole number, 0 - 10, no decimals, no words – just the number of widgets and zercs, respectively.)
1 point
QUESTION 14
1. TABLE B
Budget = 10
Price
=1
Price
=2
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
0
1
500
1
100
2
900
2
190
3
1200
3
260
4
1380
4
300
5
1500
5
320
6
1580
6
330
7
1650
7
335
8
1700
8
338
9
1720
9
339
10
1730
10
340
2.
3. Now suppose the price of widgets goes back to $1 and the price of zercs rises to $2. The utility maiximizing combination of widgets and zercs is now widgets and zercs. (Enter a whole number, 0 - 10, no decimals, no words – just the number of widgets and zercs, respectively.)
1 point
QUESTION 15
1. The law of (three words) ______ ________ ________explains why an indifference curve is convex to the origin.
1 point
QUESTION 16
1. The budget constraint is negatively sloped because:
A.
Assuming that your tastes are constant, when you buy more of one good, you want less of another good.
B.
Assuming that your income is a given, when you buy more units of one product you can afford fewer units of the other.
C.
Neither of the above, the budget constraint is positively sloped.
D.
Neither of the above, the budget constraint is horizontal.
2 points
QUESTION 17
1. Refer to Graph. This consumer prefers combination D to combination C.
True
False
2 points
QUESTION 18
1. Refer to Graph If the price of good Y went up, the budget constraint would become flatter (i.e., less steep).
True
False
2 points
QUESTION 19
1. Refer to Graph This consumer is indifferent between combinations A, B & C.
True
False
2 points
QUESTION 20
1. Refer to Graph. Given his budget, relative prices of X & Y, and his preferences between X & Y, as indicated by this graph, the utility maximizing combination is C.
True
False
Budget = 10
Price
=2
Price
=1
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
0
1
500
1
100
2
900
2
190
3
1200
3
260
4
1380
4
300
5
1500
5
320
6
1580
6
330
7
1650
7
335
8
1700
8
338
9
1720
9
339
10
1730
10
340
Explanation / Answer
Question 13.
1.
Total budget = $10
Price of widget = $2 per widget
Price of zercs = $1 per zerc
Following is the complete table -
2.
The utility maximizng combination of widget and zercs will be that combination at which -
MU/P of widget = MU/P of zercs
The above table shows that at following combinations of widget and zercs, the above-mentioned condition is fulfilled-
4 widgets and 2 zercs
6 widgets and 4 zercs
9 widgets and 6 zercs
10 widgets and 7 zercs
The cost of Ist combination is (4*$2 + 2*$1) $10.
The cost of IInd combination is (6*$2 + 4*$1) $16.
The cost of IIIrd combination is (9*$2 + 6*$1) $24.
The cost of IVth combination is (10*$2 + 7*$1) $27.
The budget is $10.
It can be seen that out of four combinations, only Ist combination can be afforded as it is with in budget and at this combination utility maximizing condition is also being fulfilled.
Thus,
The utility-maximizing combination of widgets and zercs is 4 widgets and 2 zercs.
Widget Total Utility Marginal Utility MU/P Zercs Total Utility Marginal Utility MU/P 0 0 - - 0 - - - 1 500 500 250 1 100 100 100 2 900 400 200 2 190 90 90 3 1200 300 150 3 260 70 70 4 1380 180 90 4 300 40 40 5 1500 120 60 5 320 20 20 6 1580 80 40 6 330 10 10 7 1650 70 35 7 335 5 5 8 1700 50 25 8 338 3 3 9 1720 20 10 9 339 1 1 10 1730 10 5 10 340 1 1Related Questions
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