Question: i L_ .,, Assume Moana has preferences represented by utility function U (331, 332) = (3:1)1/3 (362)2/3 . Good 1 is coconuts (331) while good

i L_ .,, Assume Moana has preferences represented by utility function U (331, 332) = (3:1)1/3 (362)2/3 . Good 1 is coconuts (331) while good 2 is bananas (332). Suppose she has an income level of m : 120 dollars. In addition, the price of good 1 is p1 = 2 and the price of good 2 is p2 = 1. (a) What is the MRS at consumption bundle (15, 90)? What about (20,80)? (b) Interpret what Moana's MRS represent at (15,90) and (20, 80), respectively. (c) What is the optimal consumption? [50 points] Suppose there is a per-unit tax (or sales tax) of t = 2 imposed on coconuts. Assume Moana is the only person (or a representative consumer) in this economy. (d) What is the optimal consumption? (e) Graph the optimal consumption bundles before and after the tax. (f) In part (e), we see a tax-induced \"price effect,\" which can be decomposed to \"substitution\" and \"income\" effects. Add to your answer in (e), the necessary graphs to demonstrate these effects separately. (g) How does the demand for coconuts change due to substitution effect? [10 points] Heihei tells Moana that if coconuts is an inferior good, then the law of demand does not hold. (h) Is this true? Justify your answer using a graph

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

1) Create a dimensional model containing an aggregated fact table, where a fact table shows a summary of daily revenue amount for each officer. Use ERDPlus to create your model. 2) Populate the...

1. Calculate the cost of each capital component, after-tax cost of debt, cost of preferred, and cost of equity with the DCF method and CAPM method. 2. What do you estimate the company?s WACC? Please...

Hello may you help me solve these SP10.1 Price discrimination Valair is an airline flying a particular route that has seasonal demand. The firm's total demand is given by: Q = 600 - 4P (10.5) where Q...

I am working on a homework problem and am stumped on part B. Kim hotels is interested in developing a new hotel in seoul. The company estimates that the hotel would require an initial investment of...

Please answer Step 1 to Step 4 Step 1 - Understanding the Model: There are two datasets. diamonds?contains the data used to build the regression model. new diamonds contains the data for the diamonds...

205microeconomics 3. The following matrix describes strict preferences of student interns and hospitals where the students might work. The rst numbers represent the preferences of students and the...

What will be the exit strategy for Nantucket Nectars. Explain the financial and growth analysis of the company. ( Please use exhibits to do calculations in excel ) 898-171 Nantucket Nectars It was...

What will be the exit strategy for Nantucket Nectars. Explain the financial and growth analysis of the company. 898-171 Nantucket Nectars It was certainly exciting to have some companies interested...

For the project, Students should read Chapter 19 and then write a short Chapter Summary, T he world is a giant shopping mall, and Americans are big spenders. For example, the U.S. population is less...

II) A normal deck of cards has 52 cards. 4 of those cards are Aces. Three cards are chosen from the deck, Find these probabilities: a) The first card is NOT an ace b) P(the second card is an ace/...

Consider the accompanying cash flow diagram. Compute the equivalent annual worth at i' = 10%. $2,000 $2.000 $1.500 $1,000 S1 500 $2.000 Years $5.000

A n object dropped from a height o f 1 6 0 feet will fall according t o the equation h ( t ) = 1 6 0 - 1 6 t 2 , where t i s measured i n seconds, and h ( t ) i s measured i n feet. What i s the...

Sing, Inc., is a taxable domestic C corporation. On January 1, 2017, of its 2,000 issued and outstanding shares, 1,575 were owned by Snap, while the remaining 425 shares were owned by unrelated...

1. Which of the following would not be an advantage of decentralization? A. Duplication of effort is minimized B. Companies can develop their own managers internally by giving lower-level managers...

Direct materials inventory, beginning of the year direct materials inventory, end of the year direct materials purchased during the year Work in process inventory, beginning of the year manufacturing...

Equipment acquired at a cost of $126,000 has a book value of $42,000. Journalize the disposal of the equipment under the following independent assumptions. a. The equipment had no market value and...

Identifying How Machine Learning Can Solve Problems What problem would you like your machine learning model to solve? What output would you like your machine learning model to produce? How will you...

7. What is the extent (percentage) of errors detected in the information collected?

8. What are the costs of collecting the information?

6. How great is the time-lag between when an event occurs until we get information about it?