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Homework 3-1

# Homework 3-1 - 2 Describe the law of diminishing marginal...

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Spring 2009 Name: ___________________ ECON 203: Principles of Microeconomics TA: ______________________ Homework 3 (10 points) Due in discussion the week of March 9 th - 13 th ; No late HWs will be accepted 1. Fill in the following table on the total and marginal utilities of a certain product A. Use your results to answer the following questions. Units of product A Total utility Marginal utility 0 0 1 20 _____ 2 35 _____ 3 _____ 10 4 _____ 5 5 _____ 0 6 45 _____ 7 35 _____ 8 _____ –15 (a) Graph both the total utility and marginal utility curves together on the same graph. (2 points for filling in the table and drawing the graph)

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(b) Explain the shape of both of the curves. (2 points) (c) Identify the point where utility is maximized on both curves. Discuss the reasoning behind each value. (2 points)
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Unformatted text preview: 2. Describe the law of diminishing marginal utility. On what assumptions is this law based? (2 points) 3. Columns 1 through 3 in the table below show the marginal utility which a particular consumer would get by purchasing various quantities of products A, B, and C. Unit of product (1) Marginal utility, A (2) Marginal utility, B (3) Marginal utility, C First 18 39 12 Second 16 36 10 Third 14 33 9 Fourth 12 30 8 Fifth 10 27 7 Sixth 8 24 5 Seventh 6 21 3 If the prices of A, B, and C are \$2, \$3, and \$1, respectively, and the consumer has \$26 to spend on these three products, what combination of the three products should be purchased in order to maximize utility? (2 points)...
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Homework 3-1 - 2 Describe the law of diminishing marginal...

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