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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.
- Spring '08