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# PS5 Answer Key - economics(1000 is more than the marginal...

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Practice Questions Answer Key-Chapter 8 1. No. of books MU MU/\$ No. of Pizzas MU MU/\$ 1 480 30 1 200 25 2 416 26 2 196 24.5 3 392 24.5 3 160 20 4 320 20 4 128 16 5 280 17.5 5 88 11 6 160 10 6 64 8 7 88 5.5 7 16 2 a. 4 books and 3 pizzas. b. 2164 units of utility. c. 3 books and 3 pizzas. 1,844 units of utility. 2. a. She is maximizing utility, since MU coke /Price coke = MU m&m /P m&m . b. She is not maximizing utility. The marginal utility per dollar of Twix (20) is less than the marginal utility per dollar of M&Ms (40). She should eat more M&Ms and fewer Twix. c. She is not maximizing utility. The marginal utility per hour of reading

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Unformatted text preview: economics (1000) is more than the marginal utility per hour of reading romance novels (800). She should read more economics and less romance. 3. a. 0.25Qs+0.5Qc=5 b. Budget constraint becomes 0.5Qs+0.5Qc=5. Budget in part a is the flatter one and in part b is the steeper one. c. MUs/MUc=Ps/Pc=0.5/0.5=1 4. Price of good Y is \$3 and at the point on the vertical axis, you can buy 0 X and 20 Y. 0*Px+20*Py=I, I=20*3=60 At point A, 12Py+4Px=I, 12*3+4Px=60, Px=6 At point B, 12Py+8Px=I, 12*3+8Px=60, Px=3 At point C, it is very hard to see how many Y are consumed, so I use the point on the horizontal axis. 0Py+30Px=60, Px=2...
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