### Jonathan''s preferences are characterized

##### Reference no: EM13150590 , Length: 263 words

Microeconomics questions.

Q1. Jonathan's preferences are characterized by diminishing marginal rate of substitution. At his current consumption level Jonathan's marginal utility from beer is 5 and his marginal utility from Coke is 4. If Coke is placed on the horizontal axis, is Jonathan's current choice an "interior" optimum if the price of a can of beer is \$2 and a can of Coke costs \$1? Explain? If not what should Jonathan to obtain an interior solution

Q5. Bin is considering two cell phone plans. The first plan gives Bin up to 300 minutes of use, CP, for a set fee of \$60 with each additional minute priced at 20 cents per minute. The second plan has no set fee, but charges 50 cents per minute. You have \$100 per month to spend on cell phone services and a "composite" good ,C, priced at \$1 per unit.

a. Draw Bin's budget constraints under each plan, label all relevant points

Q6. Shen purchases two goods, x and y. With income of \$600, Px is \$4 per unit and Py is \$5 per unit.
a. Draw the Shen's budget constraint and label all relevant points [2 marks]
b. Suppose the government imposes a tax on good x of \$2 per unit, that is, the price of x would rise to \$6. However, the tax is imposed only on the first 40 units of x purchased. Draw and appropriately label Shen's new budget line

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