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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This note was uploaded on 11/27/2011 for the course ECONOMICS 101 taught by Professor Kelly during the Fall '10 term at Wisconsin.

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

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