20 May HOW MUCH DOES RALPH ENJOY THE LAST HOTDOG HE CONSUMES?
DEPARTMENT OF ECONOMICS
WINTER 2016
ECONOMICS 1A: PRINCIPLES OF MICROECONOMICS
PROF. ZELDER
PROBLEM SET 1
Due in class on Tuesday January 19
PLEASE write your own name on your paper and staple your pages together
Please explain your answers with a paragraph or two, including diagrams and/or equations
where necessary or useful.
(1) Ralph consumes hotdogs (x), and his marginal benefit from consuming x is MB = A – Bx, while
his marginal cost of consuming hotdogs is MC = F Gx.
(a) What is the rational number of hotdogs x* for Ralph to consume? Answer as specifically
as possible based on the information given.
(b) How much does Ralph enjoy the last hotdog he consumes?
(c) Now, assuming that A = 100, B = 10, F = 40, and G = 2, answer parts (a) and (b)
again, being as specific as possible.
(d) Now, suppose again that A = 100, B = 10, and G = 2, but that we now have F = 120.
What is x*? [In answering, think about what is realistic in terms of the value of x.]
(2) Consider the following table representing Clem’s utility from consuming cookies (x):
x
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