h2_ans - The Colorado College Department of Economics and...

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1 The Colorado College Department of Economics and Business Block 7 Econ 207 HW 2 ans. 1. a. $8.00 = 20 apples can be bought. $.40/apple b. $8.00 = 80 bananas can be bought. $.10/banana c. 10 apples cost: 10 apples × $.40/apple = $4.00, so there is $8.00 – $4.00 = $4.00 left to spend on bananas which means $4.00 = 40 bananas can be bought. $.10/banana d. One less apple frees $.40 to be spent on bananas, so $.40 = 4 more bananas can be bought. $.10/banana So new purchase of bananas is 40+4 = 44. The rate of trade is given by Price of apples / Price of bananas = $.40/$.10 = 4 e. $8.00 = $.40 × number of apples + $.10 × number of bananas = .40 A + .10 B . 2. (a) (b) C D U=5 U=10 U=20
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2 (c) D=10, 10 0 0 U = = (d) When Paul buys 5 DVDs he spends 5($20) = $100. So the income he has left over to spend on CDs is $200 - $100 = $100. So he can buy 100/5 = 20 CDs. His utility will be 10 100 5 . 20 = = 3. (a) MRS = - MU of Tea/MU of Coffee MU of Tea = 4 / = T U MU of Coffee = 3 / = C
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This homework help was uploaded on 04/19/2008 for the course EC 207 taught by Professor Ghosh during the Spring '08 term at Colorado College.

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h2_ans - The Colorado College Department of Economics and...

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