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Econ 4th Edition by William McEachern
Edition 4ISBN: 978-1285423548Econ 4th Edition by William McEachern
Edition 4ISBN: 978-1285423548 Exercise 4
UTILITY MAXIMIZATION The following tables illustrate Eileen's utilities from watching first-run movies in a theater and from renting movies from a video store. Suppose that she has a monthly movie budget of $36, each movie ticket costs $6, and each video rental costs $3.
Movies in a Theater
Movies from a Video Store
a. Complete the tables.
b. Do these tables show that Eileen's preferences obey the law of diminishing marginal utility? Explain your answer.
c. How much of each good does Eileen consume in equilibrium?
d. Suppose the prices of both types of movies drop to $1 while Eileen's movie budget shrinks to $10. How much of each good does she consume in equilibrium?
Movies in a Theater
Movies from a Video Store
a. Complete the tables.
b. Do these tables show that Eileen's preferences obey the law of diminishing marginal utility? Explain your answer.
c. How much of each good does Eileen consume in equilibrium?
d. Suppose the prices of both types of movies drop to $1 while Eileen's movie budget shrinks to $10. How much of each good does she consume in equilibrium?
Explanation
Verified
Verified
a. Utility Table: Movies in Theatre
Uti...
Econ 4th Edition by William McEachern
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