Name:_________________________

ECO 101 830 Principles of Microeconomics Homework #4, !e "ria# 3$1%

1. Suppose my son, Timmy has a weekly budget of $6 and consumes two goods: toy dinosaurs, which cost $.5
each and hot wheels, which cost $1each.
a! "raw Timmy#s budget line on the graph below. $e sure to label the end points.
b! %n the graph abo&e, add an indifference cur&e and mark the consumer e'uilibrium.
c! Suppose Timmy gets a raise in his allowance to $(. )ow will this affect his budget line* "raw the
new one on the graph abo&e.
+. ,a- en.oys windsurfing and snorkeling. The table below shows the total utility /T0! he gets from each
acti&ity:
)ours per
day
T0 from
windsurfing
,0 from
windsurfing
T0 from
snorkeling
,0 from
snorkeling
1 1+ 1
+ ++ 26
3 3 16
1 36 1+(
5 1 11
6 11+ 15
hot wheels
toy dinosaurs
a! 4ill in the marginal utility /,0! from each additional hour of windsurfing and snorkeling on the table
abo&e
b! Suppose ,a- has a $35 budget and unlimited leisure time. 5indsurfing is $16hour and snorkeling is
$56hour. 7n order to ma-imi8e his total utility, how much time does ,a- spend on windsurfing and
snorkeling* Show your work. /)79T try different combination within his budget, using the ,06$
rule!
3. 0se the table below to answer the following 'uestions.
: of 5orkers
per day
Total ;roduct ,arginal ;roduct <&erage ;roduct

1 1
+ 6
3 1(
1 ++
5 +
6 ++
a! 4ill in the table abo&e.
b! <t what point /number of workers! does the firm e-perience diminishing returns* =-plain.