Question

Rachel has utility over apples A and bananas B. u(A, B) = AB. Rachel has 4 apples and 4 bananas. (a) What is Rachel’s utility at (4,4)? (b) What is Rachel’s marginal rate of substitution (MRS) at (4,4)? (c) A local fruiterer hears about Rachel’s preferences and offers her 3 apples in exchange for 2 bananas. Would Rachel agree to the trade? How does this square with your answer to (b)?

Name: rachel has utility over apples a and bananas b ua b ab rachel has 4 apples and 4 bananas a what is rachels utility at 44 b what is rachels marginal rate of substitution mrs at 44 c a local f 29418
Uploaded: 2022-07-21T05:34:44-08:00
Duration: 2 min 14 s
Channel: Prabhat Tyagi
Description: rachel has utility over apples a and bananas b ua b ab rachel has 4 apples and 4 bananas a what is rachels utility at 44 b what is rachels marginal rate of substitution mrs at 44 c a local f 29418

          Rachel has utility over apples A and bananas B. u(A, B) = AB. Rachel has 4 apples and 4 bananas. (a) What is Rachel’s utility at (4,4)? (b) What is Rachel’s marginal rate of substitution (MRS) at (4,4)? (c) A local fruiterer hears about Rachel’s preferences and offers her 3 apples in exchange for 2 bananas. Would Rachel agree to the trade? How does this square with your answer to (b)?

Added by Jesse M.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Prabhat Tyagi

07/21/2022

Step 1

Step 1: Calculate Rachel's utility at (4,4) Given u(A, B) = AB, Rachel's utility at (4,4) is u(4,4) = 4*4 = 16. Show more…

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Rachel has utility over apples A and bananas B. u(A, B) = AB. Rachel has 4 apples and 4 bananas. (a) What is Rachel’s utility at (4,4)? (b) What is Rachel’s marginal rate of substitution (MRS) at (4,4)? (c) A local fruiterer hears about Rachel’s preferences and offers her 3 apples in exchange for 2 bananas. Would Rachel agree to the trade? How does this square with your answer to (b)?