1 answer

1) Fill in the missing information in the table below. Total Marginal Utility Number of Pretzels...

Question:

1) Fill in the missing information in the table below. Total Marginal Utility Number of Pretzels Total Utility Marginal Utili50 50 150 750 Food Expenditure Marginal Utility Other Expenditures Marginal Utility 1000 1200 100 800 100 1100 150 600 900 20

1) Fill in the missing information in the table below. Total Marginal Utility Number of Pretzels Total Utility Marginal Utility Number of Cookies 0 1 Utility 0 0 O 10 25 15 10 2 3. 18 24 55 55 50 2) Suppose you have a budget of $8 and cookies and pretzels cost $1 each. What is the utility maximizing combination of cookies and pretzels? How much total utility does the consumer receive? 3) Suppose the price of cookies rises to $1.50, and the price of pretzels remains the same. What is the new utility maximizing combination of cookies and pretzels? How much total utility does the consumer receive? 4) You are considering either dining at Cici's, an all-you-can-eat pizza chain, or buying pizza by the slice at a local pizzeria for $2 per slice. At which restaurant are you likely to obtain the most marginal utility from the last slice you eat? Explain your response.
50 50 150 750 Food Expenditure Marginal Utility Other Expenditures Marginal Utility 1000 1200 100 800 100 1100 150 600 900 200 400 200 200 700 300 150 500 400 50 400 400 450 300 250 250 300 600 350 100 350 450 Suppose a household divides its expenditures between food and all other consumption items. The table above gives marginal utility for household spending across these items in $50 dollar increments. Use the information in the table to answer the following questions. 1) Suppose a household has a weekly income of $250. If the household is maximizing their utility at this income level, how do they distribute their spending, i.e. how much do they spend on food and how much do they spend on other consumption? 2) Suppose the government sets the poverty line at $450 per week, and is deliberating a plan to bring households up to this standard. They are considering two proposals. The first is giving household grocery vouchers to each household equal to the difference between their income and the poverty line. The second is giving households a cash transfer equal to the difference between their income the poverty line. Would the household above be better of getting grocery vouchers worth $200 or $200 in cash?

Answers

1)

It shall be noted that Total Utility up to n units of a good = Marginal Utility of nth unit of the good + Total Utility up to n-1 units of the good

Marginal Utility of nth unit of the good = Total Utility upto n units of the good - Total Utility upto n-1 units of the good

The total utility at 0 units of the good = 0

The marginal utility at 0 units of the good = 0

Hence, the complete table is:

Number of Cookies Total Utility Marginal Utility Number of Pretzels Total Utility Marginal Utility
0 0 0 0 0 0
1 25 25 1 10 10
2 40 15 2 18 8
3 50 10 3 24 6
4 55 5 4 28 4
5 55 0 5 30 2
6 50 -5 6 30 0
.

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