103prbset2s080

103prbset2s080 - Principles of Economics 103 Second Problem...

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Principles of Economics 103 Professor Coolidge Second Problem Set Spring, 2008 9 pts. 1. Caitlin must decide how much to spend on books, ice cream, and workouts at the gym. The price of books at her favorite thrift store is $1 each, ice costs her $3 a half-gallon at Pik-It-Quik, and she has struck a deal with Arnold’s Gym to work out for $10 a session. She has $12 to spend each week. Her marginal utilities for these purchases are presented in the table below. How many books, cartons of ice cream and workouts will Caitlin purchase? # books MU of books # cartons ice cream MU ice cream # workouts MU of workouts 1 12 1 24 1 30 2 11 2 21 2 25 3 10 3 18 3 20 4 9 4 15 4 15 5 8 5 12 5 10 6 7 6 9 6 5 2. a. 2 pts. Write an equation that states the rule of utility maximization for three goods, A, B, and C. b. 3 pts. Restate the rule in words. 3. a. 2 pts. Is total utility higher when the price of a good is lower?
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This note was uploaded on 04/04/2008 for the course ECON 103 taught by Professor Coolid during the Spring '07 term at CSU Chico.

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103prbset2s080 - Principles of Economics 103 Second Problem...

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