Reference no: EM13162500
Please provide stepls for the answers.
1. In Problem 1, Sir Plus has a demand function for mead that is given by the equation D(p) = 100 - p. If the price of mead is $85, how much is Sir Plus's net consumer's surplus?
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a.
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112.50
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b.
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15
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c.
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225
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d.
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56.25
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e.
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7,650
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2. Ms. Quasimodo in Problem 3 has the utility function U(x, m) = 100x - x2/2 +m , where x is her consumption of earplugs and m is money left over to spend on other stuff. If she has $10,000 to spend on earplugs and other stuff and if the price of earplugs rises from $50 to $85, then her net consumer's surplus
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a.
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falls by 1,137.50.
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b.
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falls by 3,137.50.
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c.
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falls by 525.
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d.
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increases by 568.75.
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e.
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increases by 2,275.
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3. Bernice in Problem 5 has the utility function u(x, y) = min{x, y}, where x is the number of pairs of earrings she buys per week and y is the number of dollars per week she has left to spend on other things. (We allow the possibility that she buys fractional numbers of pairs of earrings per week.) If she originally had an income of $17 per week and was paying a price of $3 per pair of earrings, then if the price of earrings rose to $7, the compensating variation of that price change (measured in dollars per week) would be closest to
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a.
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$8.50.
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b.
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$17.
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c.
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$35.
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d.
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$34.
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e.
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$33.
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4. If Bernice (whose utility function is min{x, y}, where x is her consumption of earrings and y is money left for other stuff) had an income of $13 and was paying a price of $2 for earrings when the price of earrings went up to $3, then the equivalent variation of the price change was
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a.
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$3.25.
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b.
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$4.33.
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c.
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$8.67.
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d.
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$1.63.
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e.
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$3.79.
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5. In Problem, Lolita's utility function is U(x, y) = x - x2 /2 + y, where x is her consumption of cow feed and y is her consumption of hay. If the price of cow feed is $.30, the price of hay is $1, and her income is $2 and if Lolita chooses the combination of hay and cow feed that she likes best from among those combinations she can afford, her utility will be
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a.
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2.24.
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b.
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1.70.
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c.
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0.24.
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d.
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3.24.
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e.
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1.24.
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