7. MRS and utility maximization Cho lives in Miami and loves to eat desserts. She spends her entire weekly allowance on pudding and pie. A bowl of pudding is priced at $1.50, and a piece of pumpkin pie is priced at $4.50. At her current consumption point, Cho's marginal rate of substitution (MRS) of pudding for pie is 5. This means that Cho is willing to trade five bowls of pudding per week for one piece of pie per week. Does Cho's current bundle maximize her utility-in other words, make her as well off as possible? If not, how should she change it to maximize her utility? Cho could increase her utility by buying less pudding and more pie per week. O Cho's current bundle maximizes her utility, and she should keep it unchanged. Cho could increase her utility by buying more pudding and less pie per week.

7. MRS and utility maximization Cho lives in Miami and loves to eat desserts. She spends her entire weekly allowance on pudding and pie. A bowl of pudding is priced at $1.50, and a piece of pumpkin pie is priced at $4.50. At her current consumption point, Cho's marginal rate of substitution (MRS) of pudding for pie is 5. This means that Cho is willing to trade five bowls of pudding per week for one piece of pie per week. Does Cho's current bundle maximize her utility-in other words, make her as well off as possible? If not, how should she change it to maximize her utility? Cho could increase her utility by buying less pudding and more pie per week. O Cho's current bundle maximizes her utility, and she should keep it unchanged. Cho could increase her utility by buying more pudding and less pie per week.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 8P

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Similar questions

Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
Jamani earns a weekly income of $6000. Suppose he wishes to spend this income on two goods, games and DVDs only. A game costs $200 while a DVDcosts $600. Draw Jamani’s budget line. Putting games on the Y axis. ii. Suppose his income increases to $9000 per week, illustrate what happens to her budget line.iii. Suppose the price of games increase to $600, while his income and the price of DVDs is unchanged from part (i).
7. MRS and utility maximization Suppose your classmate Dina loves to eat dessert-so much so that she allocates her entire weekly budget to apple crisp and ple. The price of one bowl of apple crisp is $1.00, and the price of a piece of blueberry pie is $4.00. At her current level of consumption, Dina's marginal rate of substitution (MRS) of apple crisp for pie is 4. In other words, Dina is willing to sacrifice four bowls of apple crisp for one piece of pie per week. Does Dina's current consumption bundle maximize her utility? That is, does it make her as well off as possible? If not, how should she change it to maximize her utility? Dina's current bundle maximizes her utility, and she should keep it unchanged. Dina could increase her utility by buying more apple crisp and less pie per week. Dina could increase her utility by buying less apple crisp and more pie per week.
Assume Pat spends all of her allowance to purchase 4 apples and 4 candy bars. Pat's marginal utility of the fourth apple is 20 utils, and her marginal utility of the fourth candy bar is 40 utils. If an apple costs $1.00 and a candy bar $0.50, to maximize utility Pat should(A) purchase more apples and more candy bars(B) maintain the current purchase of 4 apples and 4 candy bars(C) purchase more apples and fewer candy bars(D) purchase fewer apples and more candy bars(E) purchase fewer apples and fewer candy bars
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