Quantitative Methods - Unit 2 Managerial Economics 1 Managerial Economics Applied Problems Managerial Economics Applied Problems Unit 2 Managerial

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Unit 2 Managerial Economics 1 Managerial Economics Applied Problems Managerial Economics Applied Problems
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Unit 2 Managerial Economics 2 Chapter 5 Pgs. 200-01 1, 4, 6 1.) Bridget has a limited income and consumes only wine and cheese; her current consumption choice is 4 bottles of wine 10lbs of cheese. The price of wine $10 per bottle, price of cheese is $4 per pound. The last bottle added 50 units to Bridgette’s utility while the last pound of cheese added 40 units. a. Is Bridgette making the utility maximizing choice? Why or Why not? Bridgette is making a utility maximizing choice though it does not say if this is in a given month a week or a day the amount that she consumes. Initially if this was for an entire month she may not be at her highest possible levels of utility. Also we do not know what her food budget is we only know her income is limited. b. If not what should she do instead? Why? Bridgette can purchase other means of food that are less than the bottle of wine such as juice, or water, lunch meat and bread. Cheese is also something that can accommodate her other amenities, due to the fact that this can also be better for her health. 4.) The owner of Good Guys Enterprises obtains utility from income (profit) and from having the firms behave in a socially conscious manner, such as making charitable contributions or civic expenditures. Can you set up the problem and derive the optimization conditions if the owner-
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This note was uploaded on 08/30/2010 for the course MANAGEMENT 3467783 taught by Professor Langly during the Summer '10 term at University of Dayton.

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Quantitative Methods - Unit 2 Managerial Economics 1 Managerial Economics Applied Problems Managerial Economics Applied Problems Unit 2 Managerial

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