Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mickey is considering buying a tape recorder. His utility function is, where x is the amount of money he spends on other goods, y is

Mickey is considering buying a tape recorder. His utility function is, where x is the amount of money he spends on other goods,yis the number of tape recorders he buys, andzis the number of tapes he buys. Letf(y)=0 ify<1 andf(y)=8 ifyis greater than or equal to 1. The price of tape recorders is $20, the price of tapes is $1, and Mickey can easily afford to buy a tape recorder and several tapes. Will he buy a tape recorder?

a.He is indifferent to buying a tape recorder or not.

b.He should buy a tape recorder at these prices, but if tapes were any more expensive, it would not pay to buy one.

c.There is not enough information here for us to be able to tell.

d.He should not buy a tape recorder.

e.Even if the price of tapes doubled, he should still buy a tape recorder.

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

Risk Management And Insurance

Authors: Scott E Harrington, Greg Niehaus

2nd Edition

0072339705, 9780072339703

More Books

Students also viewed these Economics questions

Question

How is a bivariate outlier identified in a scatterplot?

Answered: 1 week ago

Question

8. What values do you want others to associate you with?

Answered: 1 week ago