television. Her preferences correspond to the utility function U(A,D) = 2A + 4√D, where A

stands for the number of hours she watches American Idol and D is the number of hours she

watches Desperate Housewives.

a. How would Harriet rank the following alternatives: 4 hours of American Idol and 2 hours

of Desperate Housewives, 2 hours of American Idol and 4 hours of Desperate Housewives

and 3 hours of American Idol and 3 hours of Desperate Housewives?

b. Suppose that one week, Desperate Housewives is not shown, but there is a two-hour

American Idol special (instead of the usual one-hour program). Is Harriet better off or worse

off? Explain.

c. Would Harriet's preferences change if her utility function was expressed as U(A,D) = 2A +

4√D+6? Why or why not?

4. Nicole's income is $1,000 per month. She spends all of it on shoes (S) and books

(B). Shoes cost $50 and books cost $25. Her marginal rate of substitution for shoes with

books is MRSSB = 2B/3S. Illustrate her utility-maximizing combination of shoes and books

and draw her price-consumption curve if the price of books rises to $30

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## This question was asked on Jan 27, 2013 and answered on Jan 27, 2013.

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