disc4key - Handouts 4s Answers 1 a False The consumers...

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Handouts 4’s Answers 1. a. False. The consumers' utility remains the same. Definition of indifference curve: Set of all combinations of the two goods that give the same level of utility. So, when you move along the indifference curve utility does not change. b. False. The new opportunity set includes the initial one. So the consumer can buy more hamburgers, more movies, or both. Therefore the consumer is clearly better off. c. True. The income of consumer increases, the consumer can buy more hamburgers, more movies, or both. Therefore the consumer is clearly better off. d. False. MUc/MUb>Pc/Pb implies MUc/Pc>MUb/Pb, the marginal utility per dollar for cereal is larger, so Lucy should buy more cereal and less bread. 2. a. MU H =3, and P H =1 . This means the marginal utility per dollar for Hamburger is 3. b. MU B =1/2, and P B =1/2 . This means the marginal utility per dollar for Bread is 1. c.
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disc4key - Handouts 4s Answers 1 a False The consumers...

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