QUESTION 1 Complete the following table: 0.25 points QUESTION 2 1. What happens
ID: 469293 • Letter: Q
Question
QUESTION 1
Complete the following table:
0.25 points
QUESTION 2
1. What happens to happiness when your roommates drink beer?
increases at an increasing rate
increases at a diminishing rate
decreases at an increasing rate
decreases at a diminishing rate
0.25 points
QUESTION 3
2. How much beer will they drink at $10 a glass? glasses How much at $2? glasses
0.25 points
QUESTION 4
3. They drink less at higher prices because of:
The greater cost of brewing more beer.
Diminishing marginal utility.
The loss of friends when people get drunk.
People learn about beer when they drink more.
Beers Total Happiness Marginal Happiness 1 14 2 26 3 36 4 44 5 50 6 54 7 56 8 56 9 54 10 50Explanation / Answer
Beers
Total Happiness
Marginal Happiness
MU/$10
MU/$2
1
14
14
1.4
7
2
26
12
1.2
6
3
36
10
1
5
4
44
8
0.8
4
5
50
6
0.6
3
6
54
4
0.4
2
7
56
2
0.2
1
8
56
0
0
0
9
54
-2
-0.2
-1
10
50
-4
-0.4
-2
Marginal happiness = Change in total happiness/change in quantity
Marginal happiness for 2ndglass of beer = (26 – 14)/(2 – 1) = 12/1 = 12
Marginal happiness for 5thglass of beer = (50 – 44)/(5 – 4) = 6/1 = 6, and so on.
1. What happens to happiness when your roommates drink beer?
The Marginal happiness of drinking more glass of beer is decreasing at diminishing rate.
Correct Option: 4. Decreases at a diminishing rate.
2.
If the price per glass of beer is p, than the consumer drinks as much as glass of beer till:
Marginal utility/price >= 1
MU/p >= 1
Form above table:
For Price of $10 per glass, MU/$10 >= 1 is for three glasses of beer
For price of $10 per glass, MU/$2 >= 1 is for seven glasses of beer
Friend will drink 3 glasses of beer at $10 a glass
Friend will drink 7 glasses of beer at $2 a glass
3.
As the marginal happiness of drinking more glass of beer is diminishing in nature, friends will drink more glass of beer if the price is low, but will drink less if the price is higher. From table it can be observed that friend drinks seven glass until the marginal utility is equal to price. Whereas, drinks only 3 glass when price is $10.
Correct answer: 2. Diminishing marginal utility
Beers
Total Happiness
Marginal Happiness
MU/$10
MU/$2
1
14
14
1.4
7
2
26
12
1.2
6
3
36
10
1
5
4
44
8
0.8
4
5
50
6
0.6
3
6
54
4
0.4
2
7
56
2
0.2
1
8
56
0
0
0
9
54
-2
-0.2
-1
10
50
-4
-0.4
-2
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