Marginal utility for cups of coffee is constant

Assignment Help Business Economics

Reference no: EM131000865

Suppose that Omar’s marginal utility for cups of coffee is constant at 3.5 utile per cup no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the third he eats, and so on (that is, declining by 1 until per additional doughnut). In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on doughnuts, coffee, or both. How big would that budget have to be before he would spend a dollar buying a first cup of coffee

Reference no: EM131000865

Questions Cloud

True about a competitive market : Which of the following statements is true about a competitive market? A competitive market must have a physical location. has so many buyers and sellers that no one can influence the price. includes markets for goods and services but not for inputs. ..

Nominal anchors in the long run : Explain the main differences between the three main nominal anchor choices presented in Chapter3: i) Exchange Rate Target; ii) Money supply target; and iii) Inflation target plus interest rate policy. Use equations to support your answer and do not f..

If the increase in the money supply as being analogous : If the increase in the money supply as being analogous to giving people more money. If the output of goods and services is not growing at a similar rate, inflation will eventually occur. According to PPP Theory, what will happen to the U.S. dollar? W..

Graph a typical indifference curve for function : Utility is given as: U(x, y) = min(x,y) (a) Graph a typical indifference curve for this function. (Hint: Choose a level of utility and draw various combinations of x, y that result in that level) (b) Give examples of goods that are well represented b..

Marginal utility for cups of coffee is constant : Suppose that Omar’s marginal utility for cups of coffee is constant at 3.5 utile per cup no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the..

What is the impact of this policy on the market quantity : Suppose the supply of coal is perfectly inelastic, and the price elasticity of demand for coal is -0.4. If the government imposes a binding price ceiling for coal at a price that is 20 percent below the market equilibrium price, what is the impact of..

Price of product and quantity of the product demanded : Which of the following established the inverse relationship between the price of a product and the quantity of the product demanded?

Will the household be better or worse off under new program : Suppose that the average household in a state consumes 800 gallons of gasoline per year. A 20-cent gasoline tax is introduced, coupled with a $160 annual tax rebate per household. Will the household be better or worse off under the new program?

Write a utility function for consumer : Suppose that a consumer has a choice between gallon jugs of milk and half gallon jugs of milk. The consumer only cares about how much milk she consumes and not about the size of the jugs of milk. Write a utility function for this consumer. Is there a..

User Account

All Pages