1. The marginal utility of good A is 4 utils, and its price is $2. The...

1. The marginal utility of good A is 4 utils, and its price is $2. The marginal utility of good B is 6 utils, and its price is $1.

Define Marginal Utility (MU) and show all your calculations using the appropriate formula.

(A) Is the individual consumer maximizing (total) utility if she spends a total of $3 by buying one unit of each good?

(B) If not, how can more utility be obtained?

2. After each toss of the coin, one person has more money and one person has less. If the person with less money cares about relative rank and status, will he be willing to pay, say, $1 to reduce the other person’s winnings by, say, 50 ₵? Will he be willing to pay 25 ₵ to reduce the other person’s winnings by $1? Explain your answers.

Expert Solution

Rahul Sunny answered 1 year ago

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