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Unformatted text preview: maximizing her utility? If so, explain how you know. If not, how should she rearrange her spending? Answer : The information given enables us to conclude that Sue’s average utility per dollar is the same for both pizza and yogurt. But this information does not enable us to say whether her current combination of the two goods is optimal. To do that, we must be able to compare their respective values of marginal utility per dollar. 7. For the demand curve shown, find the total amount of consumer surplus that results in the gasoline market if gasoline sells for $2 per gallon. Find the total amount of consumer surplus if gasoline sells for $3 per gallon and the change in consumer surplus. Answer : If gasoline sells for $2 per gallon, consumer surplus is (1/2)(80,000 gal/yr)($8/gal)= $320,000/yr. If gasoline sells for $3 per gallon, consumer surplus is (1/2)(70,000 gal/yr)($7/gal)= $245,000/yr. Consumer surplus has fallen by $75,000/yr....
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.
- Spring '08