Problem 1
Total utility is maximized when marginal utility becomes (positive, zero, negative) ________ .
Problem 5
Petra has \(\$ 480\) to spend on DVDs and books. A book costs \(\$ 24\) and a DVD costs \(\$ 15\). [LO 7.2] a. Write an equation for the budget constraint. Let \(x=\) books. Let \(y=\) DVDs. b. Use your equation to determine how many books Petra can buy if she buys 8 DVDs.
Problem 6
Jordan visits her sister several times a year. Jordan's travel budget is \(\$ 600,\) which she uses to buy bus tickets and train tickets. The train costs \(\$ 120\) per trip, and the bus costs \(\$ 40 .[\mathrm{LO} 7.2,7.3]\) a. Graph Jordan's budget constraint. b. How many total trips can Jordan take if she takes the train three times? c. Suppose Jordan's travel budget is cut to \(\$ 360 .\) Draw her new budget constraint. d. How many train trips can she take if she doesn't want to reduce the total number of trips she takes each year?
Problem 7
Maria has a \(\$ 300\) gift certificate at a spa that she can use on massages or manicures. A massage costs \(\$ 100,\) and a manicure costs \(\$ 30\). [LO 7.3, 7.4] a. Write the equation for Maria's budget constraint. Let \(x=\) massages. Let \(y=\) manicures. b. Suppose Maria decides to split her gift certificate with a friend and transfers half of the value of her gift certificate to her friend. Write the equation for her new budget constraint. c. After giving away half of her gift certificate, suppose the price of massages increases by 50 percent before Maria can use her gift certificate. Write the equation for her new budget constraint.
Problem 8
Every year, Heather hosts a holiday party for her friends. Her party budget is \(\$ 200 .\) Heather spends her budget on food platters that cost \(\$ 25\) each and on entertainment, which costs \(\$ 50\) per hour. [LO 7.4] a. Graph Heather's budget constraint for food and entertainment. b. To reward her loyal business, the entertainment company Heather hires has offered her a 50 percent discount on entertainment purchases for this year's party. On your graph, illustrate Heather's new budget constraint for food and entertainment. c. Assuming that food platters and entertainment are normal goods, what can you say about the quantity of each good that Heather will purchase after the discount? Will the quantity of entertainment increase or decrease, or is the change uncertain? Will the quantity of food increase or decrease, or is the change uncertain?
Problem 9
Hideki attends baseball games and goes to movie theaters. Baseball tickets cost \(\$ 15,\) and movie tickets cost \(\$ 10 .\) His entertainment budget is \(\$ 180\). \(\left[\mathrm{LO}_{7.4}\right]\) a. Graph Hideki's budget constraint for baseball and movie tickets. b. Suppose the home team is having a good season, and the price of baseball tickets goes up to \(\$ 20\) per game. Graph the new budget constraint. c. Assuming that baseball and movie tickets are normal goods, what can you say about the quantity of each good that Hideki will consume after the price of baseball tickets goes up? Will the quantity of baseball games he attends increase or decrease, or is the change uncertain? Will the quantity of movies he watches increase or decrease, or is the change uncertain?
Problem 10
For which of the following goods is the utility you get from consuming them likely to be affected by the opinions of others? [LO 7.5] a. MP3s. b. A new car. c. Running shoes. d. A new laptop for class.
Problem 11
Say whether each of the following situations is an example of altruism or reciprocity. [LO 7.5] a. Giving a few canned goods to the local food bank for its annual food drive. b. Helping someone move her couch after she helped you study for an upcoming exam. c. The biological relationship between cleaner fish and large predators in the ocean, in which cleaner fish keep the predator free from parasites and the predator keeps the cleaner fish safe.
