101hwk4

# 101hwk4 - 5 400 140 6 412 150 hot wheels toy dinosaurs a...

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Name:_________________________ ECO 101 830 Principles of Microeconomics Homework #4, due Friday 3/16 1. Suppose my son, Timmy has a weekly budget of \$6 and consumes two goods: toy dinosaurs, which cost \$.50 each and hot wheels, which cost \$1each. a) Draw Timmy’s budget line on the graph below. Be sure to label the end points. b) On the graph above, add an indifference curve and mark the consumer equilibrium. c) Suppose Timmy gets a raise in his allowance to \$8. How will this affect his budget line? Draw the new one on the graph above. 2. Max enjoys windsurfing and snorkeling. The table below shows the total utility (TU) he gets from each activity: Hours per day TU from windsurfing MU from windsurfing TU from snorkeling MU from snorkeling 1 120 40 2 220 76 3 300 106 4 360 128

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Unformatted text preview: 5 400 140 6 412 150 hot wheels toy dinosaurs a) Fill in the marginal utility (MU) from each additional hour of windsurfing and snorkeling on the table above b) Suppose Max has a \$35 budget and unlimited leisure time. Windsurfing is \$10/hour and snorkeling is \$5/hour. In order to maximize his total utility, how much time does Max spend on windsurfing and snorkeling? Show your work. (HINT try different combination within his budget, using the MU/\$ rule) 3. Use the table below to answer the following questions. # of Workers per day Total Product Marginal Product Average Product 1 4 2 6 3 18 4 22 5 2 6 22 a) Fill in the table above. b) At what point (number of workers) does the firm experience diminishing returns? Explain....
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