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Author Question: Refer to Figure 11-15. What is the combination of inputs that produces 200 gooseberry pies at the ... (Read 52 times)

Lobcity

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on: Jun 29, 2018
Refer to Figure 11-15. What is the combination of inputs that produces 200 gooseberry pies at the lowest cost?
 
  A) combination e: 10 hours of labor and 48 units of capital
  B) combination f: 40 hours of labor and 24 units of capital
  C) combination g: 60 hours of labor and 14 units of capital
  D) combination h: 60 hours of labor and 9 units of capital

Question 2

Grant has 200 to spend each month on restaurant meals and jazz performances at his
  neighborhood jazz club. The price of a typical restaurant meal is 20 and the price of a jazz performance ticket is 10.
 
  Grant is maximizing his utility by consuming 6 restaurant meals and attending 8 jazz performances. Suppose Grant still has 200 to spend, but the price of restaurant meal rises to 25, while the price of jazz performance ticket drops to 8. Can it be determined if Grant is better off or worse off than he was before the price change? Use a budget constraint/indifference curve graph to illustrate your answer.


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amandanbreshears

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Reply #1 on: Jun 29, 2018
Answer to Question 1

B

Answer to Question 2

Initially, when the price of a typical restaurant meal is 20 and the price of a jazz performance ticket is 10, Grant consumes the bundle A on BC1. Following the price changes, Grant's new budget line is BC2. He is no longer able to afford this same bundle A as shown in the figure below, but without having information to plot his new indifference curve, it is uncertain whether he is better off or worse off than he was before the price change.


Lobcity

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Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

tandmlomax84

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

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