Suppose Jimi has reference dependent preferences over guitars and money as in Tversky and Kahneman (1991). His utility functions are given below. Gains Gains 400 -2 -2 2 Guitars 2$ Losses Losses i-600 -2 What is the least amount of money Jimi is willing to accept to sell one of his guitars? (just enter a dollar amount, i.e., "10o0", not "$1000"
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- Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a round—trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.I like drinking Smirnoff and Stoli Vodka, but I really only careabout the total amount of alcohol I get out of it. They areperfect substitutes. Smirnoff is sold in liter bottles that are100 proof (that’s 50% alcohol). Stoli is sold in liter bottlesthat are 80 proof (40% alcohol). What is my utility functionfor bundles of these two vodkas? What do my indifferencecurves look like?
- Please no written by hand and no emage Consider a consumer that consumes 2 teaspoons of sugar with each cup of coffee. For each cup of coffee with sugar the consumer gains 10 utils.a) Write down the utility function that gives the total utility if the consumer consumes S teaspoons of sugar and C cups of coffee. The consumer has assigned £7 per week to be spent on drinking coffee with sugar. The current price of coffee is £0.50 per cup and each spoon of sugar costs £0.10. b) Calculate the optimal weekly consumption bundle for this consumer.c) Does the consumer view C and S as complements or substitutes?7. Bob receives utility from days spent traveling on vacation domestically (D) and daysspent traveling in a foreign country (F) as given by the utilityU(D; F) = DFThe price of a day spent traveling domestically is 160 pounds and in a foreigncountry 200 pounds. Bobís annual budget for traveling is 8000 pounds. (a) Find Bobís utility maximising choice of days traveling domestically and of daystravelling in a foreign country. Find also his utility level from consuming thatbundle. Suppose that the price of domestic traveling increases to 250 pounds per day.Denoting his budget for traveling x, (suppose by now that it is unknown) findthe demand for D and F under the new prices as a function of x.John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke, or does he show increasing marginal utility for Coke? Supposethat John has $3 in his pocket. If Cokes cost $1 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too? What about the third dollar? If John’s marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke?
- Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either callher on the land-line phone for five cents per minute or he can drive to see her, at a round-trip cost of $2 in gasolinemoney. He has a total of $10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses ahandy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values inTable 6.6, figure out the points on Jeremy’s consumption choice budget constraint (it may be helpful to do a sketch)and identify his utility-maximizing pointceriuppose that Isaiah has a weekly fixed budget and spends it all on haircuts and ice cream. At his current combination arof consumption, the marginal utility of the last dollar spent on haircuts is greater than the marginal utility of the last dollar spent on ice cream. Has Isaiah maximized his utility? A C E Yes, because changing his current consumption combination will reduce his total utility B No, because he can increase his total utility by purchasing more haircuts and D fewer ice creams Yes, because he has purchased 2 goods in proportion so that he can get- the maximum utility from each Yes, because he purchased the maximum possible with a limited budget No, because he can increase his total utility by purchasing fewer haircuts and more ice creamsJohn likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke or does he show increasing marginal utility for Coke? Suppose that John has $3 in his pocket. If Cokes cost $1 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too? What about the third dollar? If John’s marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke? *use tables and/or graphs if possible, please original work
- Refer to the accompanying figure. The marginal utility of the 6th pizza is: Total Utility 105 100 90 75 55 30 1 Multiple Choice O95 100 51 2 3 4 Quantity (pizzas/week) 5 9 7Suppose the seventh carrot you consume provides a marginal utility of 1 util and after eating the eighth carrot, you would have a total of 5 utils. If you consume the eighth carrot your marginal utility will O decrease by 4 O increase by 4 decrease by 1 increase by 1 O not enough information to determine the answer.If Utility=.5lnX+3Z+10+4VW then Marginal utility from X is...... and the Mu of Z is...... Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a b с 10; 3 3,4 5/X; 3 d 2/VW; 3
