80.2K

Verified Solution

Link Copied!

Juliette and Andrew regularly go to the movies, where they liketo consume popcorn and slushies. At the movies, Juliette’s utilityfunction is given by UJ=√P×S, where P is the number ofcups of popcorn, and S is the number of slushies sheconsumes. Andrew’s utility function is given by UA=P+S.

a. Compute the utility Juliette and Andrewreceive from the following combinations of popcorn andslushies:

Units of Popcorn	Units of Slushies	Juliette's Utility	Andrew's Utility
1	1	1	2
2	2	2	4
3	3	3	6

b. Suppose that Juliette and Andrew are eachconsuming 2 popcorns and 2 slushies. Who gets the most happinessfrom her or his movie snacks?

Juliette

It's not possible to say.

Both get equal happiness.

Andrew

c. Suppose that Juliette has consumed 2popcorns and 3 slushies. What is the approximate marginal utilityJuliette will receive if she eats another cup of popcorn?

0.49

0.45

0.61

0.55

What is the approximate marginal utility she will receive if,instead, she drinks another slushie?

0.45

0.38

0.61

0.55

d. When Andrew is consuming 1 popcorn and 1slushie, another popcorn will increase his utility by 1 unit. WhenAndrew is consuming 8 popcorns and 1 slushie, another popcorn willagain increase his utility by 1 unit.

Which assumption of consumer preferences might Andrew’sparticular utility function violate?

Transitivity

For most goods, more is better than less

Completeness and rankability

The more a consumer has of a good, the less one is willing togive up of something else to get more of it

Juliette’s utility function appears to violate the sameassumption.

False

True