Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Van enjoys consuming both milk and juice. Each glass of milk costs Py = $1, and each glass of juice costs P, = $2. Suppose

image text in transcribed
image text in transcribed
Van enjoys consuming both milk and juice. Each glass of milk costs Py = $1, and each glass of juice costs P, = $2. Suppose that Van buys 300 glasses of milk and 200 glasses of juice per year. The following graphs show his marginal utility curves for milk and juice. At his current consumption level, Van's marginal utility from consuming the last glass of milk he bought is MUM = 30 utils per glass, and his marginal utility from consuming the last glass of juice he bought is MUj = 30 utils per glass. (?) (?) 50 40 MU OF MILK (Utils per glass) MU OF JUICE (Utils per glass) 30 100 200 300 40 500 600 MILK (Glasses per year) 100 200 300 400 500 600 JUICE (Glasses per year) Is Van currently maximizing his utility? No; he could buy more juice and less milk, not spend any more money, and be better off. No; he likes juice and milk more than other goods, so he should buy more of both. ) Yes; the marginal utility he receives from his last glass of milk equals that of his last glass of juice. )No; he could buy less juice and more milk, not spend any more money, and be better off. For each of the following combinations of milk and juice, calculate the marginal utility per dollar from the last glass of milk and the last glass of juice. Then, use the dropdown menus in the last column to indicate which of the combinations satisfy the condition for consumer equilibrium. Milk Juice Combination (Glasses per Year) (Glasses per Year) Consumer Equilibrium? A 200 100 B 400 200 C 300 300 D 500 400 Suppose Van has a "beverage budget" of $1,355 per year, which he spends on milk and juice. To maximize his utility, Van will purchase glasses of milk and glasses of juice per year

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

E Marketing

Authors: Raymond Frost

7th Edition INTERNATIONAL EDITION

0132953443, 978-0132953443

More Books

Students also viewed these Economics questions