Econ 101 - Microeconomics » Winter 2022 » Ch 19 Application Exercise Part 1

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Question #1
Choice 1 (Beverage): Kombucha vs. Pabst Blue Ribbon 1. Marginal Utility of kombucha= 500; Price of kombucha=$5 2. Marginal Utility of Pabst Blue Ribbon=100; Price of Pabst Blue Ribbon=$1 Which beverage will a utility maximizing individual choose?
A.   Neither of them because both beverages are terrible.
B.   The individual is indifferent between the two beverages due to the fact that the marginal utility per dollar for both beverages are equal.
C.   Kombucha
D.   Pabst Blue Ribbon
Question #2
Choice 2 (activity): date with Harley Harriet vs. Library Lucy 1. Marginal utility of Harley Harriet=10,000; Price=$100 2. Marginal utility of Library Lucy=100; Price=$20 Question: Which date will a utility maximizing individual choose?
A.   Harley Harriet
B.   The individual will not go on a date.
C.   Library Lucy
D.   The individual is indifferent between the two dates due to the fact that the marginal utility per dollar
Question #3
Choice 3 (activity): hot air balloon ride vs San Diego Zoo 1. Marginal utility of hot air balloon=20,000; Price=$80 2. Marginal utility of San Diego Zoo=10,000; Price=$100 Question: Which activity will a utility maximizing individual choose?
A.   San Diego Zoo
B.   The individual will choose neither of the activities.
C.   The individual is indifferent between the two activities due to the fact that the marginal utility per dollar
D.   hot air balloon
Question #4
Now suppose that an individual needs to make a simultaneous decision where they consume 1 beverage and choose 1 activity. Which of the following is a plausible combination that a rational utility maximizing individual would make?
A.   Kombucha and hot air balloon ride.
B.   Pabst Blue Ribbon and the San Diego Zoo.
C.   Kombucha and a date with Harley Harriet.
D.   Pabst Blue Ribbon and Library Lucy.

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