Mickey is considering buying a tape recorder.His utility function is U(x, y, z) = x + f(y) z.5, where x is the amount of money he spends on other goods, y is the number of tape recorders he buys, and z is the number of tapes he buys.Let f (y) = 0 if y < 1 and f (y) = 8 if y is greater than or equal to 1.The price of tape recorders is $20, the price of tapes is $1, and Mickey can easily afford to buy a tape recorder and several tapes.Will he buy a tape recorder?
A) He should buy a tape recorder at these prices, but if tapes were any more expensive, it would not pay to buy one.
B) He should not buy a tape recorder.
C) He is indifferent to buying a tape recorder or not.
D) Even if the price of tapes doubled, he should still buy a tape recorder.
E) There is not enough information here for us to be able to tell.
Correct Answer:
Verified
Q30: Quasilinear preferences are homothetic when the optimal
Q31: Natalie consumes only apples and tomatoes.Her utility
Q32: Regardless of his income and regardless of
Q33: Mike consumes two commodities, x and y,
Q34: Where x is the quantity of good
Q36: Madonna buys only two goods.Her utility function
Q37: Daisy received a tape recorder as a
Q38: For m > p2, the demand functions
Q39: Darlene's utility function is U(x, y, z)=
Q40: Clarissa's utility function is U(r, z)= z
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents