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Observations_on_HWK_6

# Observations_on_HWK_6 - Q21 By looking at the figure we can...

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Q21 : By looking at the figure we can see that the total utility from 2 slices of pizza is between 45 and 55. The alternatives are: (a) 45 (b) 60 (c) 30 (d) 15 It is clear that the only alternative satisfying the requirement of being between 45 and 55 is (a), which is the right answer. Q25 : The marginal utility (MgU) for apples is decreasing after the first apple. However, it is not strictly decreasing since the MgU one gets going from the 4th to the 5th apple is the same as the MgU one gets going from the 3rd to the 4th apple.
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Unformatted text preview: Notice that the Principle of Decreasing MgU must hold: even though the MgUs from 4th and 5th apples are the same, the MgU from, say, the 10th apple must be less than 5. Q27 : Again, the Principle of Decreasing MgU applies. Hence, the MgU from extra apples will decrease until it reaches zero and will eventually become negative. But when the MgU is negative, consuming one extra apple will decrease total utility. Therefore, we can say that the total utility first increases and then decreases....
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