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PROBLEM SET 4

# PROBLEM SET 4 - PROBLEM SET 4 Utility and Consumer Choice...

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PROBLEM SET 4 Utility and Consumer Choice Department of Economics Professor William Stull Temple University Economics 92 A. Mikey Enjoys Life Mikey's total utility schedule for Life cereal is shown in the table below. Bowls per Day Total Utility (utils) Marginal Utility (utils) ----------------- ---------------------- --------------------------- 0 0 _______ 1 20 _______ 2 50 _______ 3 70 _______ 4 80 _______ 5 80 _______ 6 70 _______ 7 50 1. Compute Mikey's marginal utilities and record them in the table. 2. According to the table, which bowl first produces diminishing marginal utility? _________ _ 3. According to the table, which bowl starts to make Mikey sick? __________

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4. Plot total utility against bowls consumed in Figure A. Put bowls on the horizontal axis. Connect the dots with a smooth curve. You have drawn Mikey's total utility (TU) curve. 5. Plot marginal utility against bowls in Figure B using the same horizontal scale as in Figure A. Locate each marginal utility value at the midpoint between the two relevant quantities. For example, the marginal utility of the second bowl should be plotted halfway between one and two bowls along the horizontal axis.
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