ch 7 - B. Ricardo will chose to save $4 because it order to...

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Danielle Cirillo Econ 202-01 Chapter 7 Pg. 136 1, 2,3,4,10,11 Dr. Abdulahad 1. Units consumed Total Utility Marginal Utility 0 0 0 1 10 10 2 18 8 3 25 7 4 30 5 5 33 3 6 34 1 A. Total Utility is increasing at a decreasing rate. You know this because marginal utility is decreasing. B. No, because a product that is bought after the 1 st marginal utility could still be desirable. C. Yes, it is possible that consumer will not purchase any units of a product if a product is priced very high. 2. No, because if she was buying the utility maximizing combination the marginal utilities of the last two purchases would equal each other. She should reallocate her expenditures between the two goods by purchasing the highest about of units with the best price 1 st and then work down from there. She should stop when the last two purchases equal each other even if she has money left over. 3. A. You would buy 4 units of A, 3 units of B, 3 units of C and 0 units of D.
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Unformatted text preview: B. Ricardo will chose to save $4 because it order to maximize utility the last units of each product must equal each other which in this case is $2. C. A=36/18=2 B=12/6=2 C=8/4=2 4. You would buy 2 units of X and 5 units of Y. The total utility you will realize is 48. If the price of X falls to $1 you will buy 4 of x and 5 of Y. Price Quantity Demand $2 2 $1 4 10. This is not a fair bet in terms of utility because as you bet more money, the satisfaction level (marginal utility rate) does not rise it is still 10%. It is a less fair bet when house takes a cut of each dollar because now you are winning less money for a low satisfaction. Yes, gambling is irrational because it doesnt matter how much you bet, your still only getting 10% back if you win. 11....
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This note was uploaded on 04/17/2008 for the course ECON 202 taught by Professor Abdulahad during the Spring '08 term at Manhattan College.

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ch 7 - B. Ricardo will chose to save $4 because it order to...

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