Reference no: EM13375467 , Length: 263 words

Microeconomics questions.

Q1. Jonathan's preferences are characterized by diminishing marginal rate of substitution. At his current consumption level Jonathan's marginal utility from beer is 5 and his marginal utility from Coke is 4. If Coke is placed on the horizontal axis, is Jonathan's current choice an "interior" optimum if the price of a can of beer is $2 and a can of Coke costs $1? Explain? If not what should Jonathan to obtain an interior solution

Q5. Bin is considering two cell phone plans. The first plan gives Bin up to 300 minutes of use, CP, for a set fee of $60 with each additional minute priced at 20 cents per minute. The second plan has no set fee, but charges 50 cents per minute. You have $100 per month to spend on cell phone services and a "composite" good ,C, priced at $1 per unit. 

a. Draw Bin's budget constraints under each plan, label all relevant points

Q6. Shen purchases two goods, x and y. With income of $600, Px is $4 per unit and Py is $5 per unit. 
a. Draw the Shen's budget constraint and label all relevant points [2 marks] 
b. Suppose the government imposes a tax on good x of $2 per unit, that is, the price of x would rise to $6. However, the tax is imposed only on the first 40 units of x purchased. Draw and appropriately label Shen's new budget line