2. Su pose Joe's utility and marginal utility functions of hamburger (H) and Coca-Cola (C) are:...

 

Transcribed Image Text:

2. Su pose Joe's utility and marginal utility functions of hamburger (H) and Coca-Cola (C) are: U(H,C) = 2√HC C H MUH = MUC = H C (1) What is the law of diminishing marginal utility? Show it using 1 and 2 hamburgers. (2) With hamburger on the horizontal axis, graph the indifference curve associated with U = 6 and mark at least 3 points along the indifference curve. (3) Calculate the Marginal Rate Substitution (MRS). What is diminishing MRS? Give an example using three points from your graph above. (4) Does Joe's preference display the pattern of "averages are preferred to extremes"? Use your graph in (2) to support your conclusion. 2 2. Su pose Joe's utility and marginal utility functions of hamburger (H) and Coca-Cola (C) are: U(H,C) = 2√HC C H MUH = MUC = H C (1) What is the law of diminishing marginal utility? Show it using 1 and 2 hamburgers. (2) With hamburger on the horizontal axis, graph the indifference curve associated with U = 6 and mark at least 3 points along the indifference curve. (3) Calculate the Marginal Rate Substitution (MRS). What is diminishing MRS? Give an example using three points from your graph above. (4) Does Joe's preference display the pattern of "averages are preferred to extremes"? Use your graph in (2) to support your conclusion. 2

Answer rating: 100% (QA)

1 The law of diminishing marginal utility states that as a consumer consumes more of a good the additional satisfaction or utility derived from each a... View the full answer