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**Unformatted text preview: **1. Total and marginal utility Aa Aa — Albert enjoys going to see baseball games. The table that follows contains information on Albert's utility from tickets.
Fill in the three missing utils. Tickets Total Utility Marginal Utility
(Pairs per season) (Utils per season) (Utils per pair)
0 0
60
1 60 50
2 4,,
3 150
30
4 180 v
20
5 200
6 210 10
—10
7 20,,
Explanation: Close A If Albert purchases one pair of tickets per season, his total utility is 60 utils. Albert's marginal utility from the second
pair of tickets he buys each season is 50 utils. Therefore, if he purchases two pairs of tickets per season, his total
utility would be 60 utils + 50 utils = 110 utils. When Albert increases the pairs of tickets he buys each season from three to four pairs, his total utility increases
from 150 utils to 180 utils. Therefore, his marginal utility from increasing consumption from three to four pairs of
tickets per season is equal to 180 utils — 150 utils = 30 utils. When Albert increases the pairs of tickeE he buys each season from six to seven pairs, his total utility decreases
from 210 utils to 200 utils. Therefore, his marginal utility from increasing consumption from six to seven pairs of
tickets per season is equal to 200 utils - 210 utils = -10 utils. 0n the following graph, use the red points (cross symbol) to plot Albert‘s total utility (TU) curve if he consumes 0, 1,
2, 3, 4, 5, 6, or 7 pairs of tickets per season. Line segments will automatically connect the points. Remember to plot
from left to right. Answer TOTAL UTILITY IUtils per season] TOTAL UTILITY [Utils per season] 2"" Total Utility 240
216 "' ‘I 216 192 192
168 168
144 11.4
120 120
96 96
72 72
48 43
21- 24 4 5 6 7 8 l. 5 6 7 8
TICKETS [Pairs per season] @ @ TICKETS [Pairs per season] Explanation: Close A If Albert doesn‘t buy any pairs of tickets, he receives zero utility, so the TU curve starts at the origin. Buying one pair
of tickets gives Albert a total utility of 60 utils, so (1, 60) is a point on his TU curve. As you found previously, buying
two pairs of tickets gives Albert a total utility of 110 utils, so (2, 110) is another point on his TU curve. Use the values
in the table to plot the rest of the points on Albert's TU curve. 0n the following graph, use the blue points (circle symbol) to plot Albert's marginal utility (MU) curve from
consuming his first seven pairs of tickets. Line segments will automatically connect the points. Remember to plot
from left to right. And to plot between integers. For example, if Albert‘s marginal utility from increasing his
consumption from one pair to two pairs of tickets is X, then you would plot a point at (1.5, X). Answer MARGINAL UTILITY [Utils per pair] MARGINAL UTILITY [Utils per pair] 7” Marginal Utility 70 I \l 60 60
50 50
1.0 1-0
an 30
20 20
10 10 0 o 4 5 6 7 8 l: 5 6 7 8
TICKETS [Pairs per season] m TICKETS [Pairs per season] Explanation: Close A The table shows Albert's total utility (TU) and marginal utility (MU) for his consumption of the first seven pairs of
tickets. When his consumption increases from zero to one pair of tickets, his total utility increases from 0 utils to 60
utils, so his marginal utility is 60 utils — 0 utils = 60 utils. Therefore, (0.5, 60) is a point on his MU curve. Similarly,
when Albert increases his consumption from one to two pairs of tickets, his total utility increases from 60 utils to 110
utils, so his marginal utility is 110 utils — 60 utils = 50 utils. Therefore, (1.5, 50) is another point on his MU curve. For Albert, increasing his consumption of tickets results in decreasing \l marginal utility. Explanation: Close A Albert's total utility for the ﬁrst six pairs of tickets is increasing but at a decreasing rate. That is, Albert's marginal
utility from each additional pair of tickets decreases with each additional pair he consumes. This is known as the law
of diminishing marginal utility and is shown graphically by a downward-sloping marginal utility curve. Whenever Albert's marginal utility is negative \I , his total utility is downward sloping. Explanation: Close A Albert's marginal utility at a given point is the same as the slope of his total utility curve. If consuming another pair
of tickets increases Albert's total utility, then the marginal utility of the additional pair of tickets is positive, and
Albert's total utility rises. If consuming another pair of tickets decreases Albert's total utility, then the marginal utility
of the additional pair of tickets is negative, and Albert's total utility at the next point on the curve falls. Therefore, a positive marginal utility corresponds to increasing, or upward-sloping, total utility, and a negative
marginal utility corresponds to decreasing, or downward-sloping, total utility. ...

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- Fall '16
- Economics, Utility, Harshad number, Albert