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Economics 11th Edition by William McEachern
Edition 11ISBN: 978-1305505469Economics 11th Edition by William McEachern
Edition 11ISBN: 978-1305505469 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
Util...
Economics 11th Edition by William McEachern
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