Problem 1

20-1. The campus pizzeria sells a single pizza for $12. If you order a second pizza, however, the pizzeria charges a price of whole $5 for the surplus pizza. Explain how an learning of fringy utility(prenominal) helps to explain the pizzerias pricing strategy. 20-1-A. The pricing method that the pizzeria is using shows they understand how marginal utility works, specifically diminishing marginal utility. After hitting the train of satisfaction from the offset printing pizza, a second pizza ordain not be quite as rewarding. Getting an additional pizza at a price of only $5 dollars will entice a guest to purchase it because of the lower price.Because the significance of the second pizza is little than the first, a costumer would spend less on it. 20-2. As an individual consumes more units of an item, the person eventually experiences diminishing marginal utility. This means that to growth marginal utility, the person must consume less of an item. Explain the logic of this be havior using the exercising in Problem 20-1. 20-2-A. As a consumer eats their first few slices of pizza, the level of satisfaction will eventually hit a maximum where they turn in thoroughly enjoyed it. After hitting the level of satisfaction, every(prenominal) piece of pizza after that will diminish the pleasure.Therefor, eating less pizza allows the consumer the greatest cheer because no pleasure is being added after eating to the prefigure of satisfaction. 20-3. Where possible, complete the missing cells in the table. 20-3-A. 20-4. From the data in Problem 20-3, if the price of a cheeseburger is $2, the price of a bag of French fries is $1, and you have $6 to spend (and you spend all of it), what is the utility-maximizing combination of cheeseburgers and french fries? 20-4-A. The utility-maximizing combination is 2 cheeseburgers and two orders of french fries. 20-9.Consider the movements that take place from ace draw a bead on to the coterminous (A to B to C and so on) on the heart and soul utility curve below as the individual successively increases consumption by integrity more unit, and answer the questions that follow. a. Which one-unit increase in consumption from one point to the next along the total utility curve generates the highest marginal utility? From point A to point B there is a total utility increase of 5 units, meaning the marginal utility is 5 units as well. Therefor, point A to point B generates the highest marginal utility. b.Which one-unit increase in consumption from one point to the next along the total utility curve generates zero marginal utility? maculation E to point F generates no marginal utility, meaning the marginal utility is zero. c. Which one-unit increase in consumption from one point to the next along the total utility curve generates negative marginal utility? Point F to point G decreases total utility from 11 to 10 units meaning marginal utility is negative. 20-10. Draw a marginal utility curve correspondi ng to the total utility curve show in Problem 20-9. 20-12.Refer to the following table for a different consumer, and assume that severally week this consumer buys only hot dogs and tickets to baseball feebles. The price of a hot dog is $2, and the price of a baseball game is $60. If the consumers income is $128 per week, what quantity of each item will he purchase each week at a consumer optimum? 20-12-A. The consumer will purchase 2 baseball game tickets and 4 hot dogs each week at a consumer optimum. Equal marginal utilities per dollar occur at the consumption level of 2 baseball game tickets and 4 hot dogs, with the total income equaling $128. The marginal utility per dollar spent equals 5.