Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer.

The table below shows the marginal utilities in utils that Sarah derives from consuming two goods, snacks, and movies.

Sarah has a limited weekly income of $50, and she spends it all on snacks and movies. Assume the price of snacks is $5 per unit, the price of a movie ticket is $10, and Sarah is a utility-maximizing consumer.

(a) Would Sarah be able to consume 3 snacks and 5 movies? Explain.

(b) How many snacks and movies will Sarah consume to maximize her utility? Explain.

(c) Calculate the total utility Sarah will receive from consuming the utility-maximizing combination of snacks and movies indicated in your answer in part (a).Show your work.

(d) Suppose Sarah's income increases to $60.

(i) What will happen to the marginal utility per dollar spent on movies?

(ii) Will Sarah be better off buying two more snacks or one more movie ticket? Explain.

image text in transcribed
Quantity of Snacks Marginal Utility of Snacks Quantity of Movies Marginal Utility of Movies

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Microeconomics 3e By OpenStax

Authors: OpenStax

3rd Edition

1711471496, 978-1711471495

More Books

Students also viewed these Economics questions