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Problem Set 5

# Problem Set 5 - Chapter 8 This problem set is due on...

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Chapter 8 This problem set is due on Wednesday, Oct. 14. Please turn it in before we start the class. Late submissions will not be accepted. 1. Fill in the columns below for marginal utility per dollar for books and pizza. Books cost \$16 apiece while pizza costs \$8 per pie. Use the table to answer the questions below about Kent’s choices. No. of books TU MU MU/P No. of Pizzas TU MU MU/P 1 480 _____ _____ 1 200 _____ _____ 2 896 _____ _____ 2 396 _____ _____ 3 1288 _____ _____ 3 556 _____ _____ 4 1608 _____ _____ 4 684 _____ _____ 5 1888 _____ _____ 5 772 _____ _____ 6 2048 _____ _____ 6 836 _____ _____ 7 2136 _____ _____ 7 852 _____ _____ a. How many books and pizzas will Kent purchase if he has \$88 to spend? b. What will Kent’s total utility be with his purchases in a ? c. The price of books rises to \$20 a book. How do your answer to a and b change? 2. State whether the consumer in each of the following situations is maximizing utility. If she is not, state what adjustments she should make to maximize utility.

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Problem Set 5 - Chapter 8 This problem set is due on...

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