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Line 150: + + − − 5. Indifference curve question.
→Assignment: better
4. Suppose you plan to buy a brand new car for $25,000. When you do to the car dealership to make your purchase, you notice that there is a car on the lot that looks brand new but not longer has the sticker price on it. The dealer says it was returned by someone after driving it only 100 miles. You like the color and ask if you can buy it. The dealer, seeing that you’re so interested, says he’ll sell it to you for the same price as a brand new car that has never been sold. You’re willing to buy it at full price, and do not mind one bit that someone else used it briefly and returned it. But you notice that other people (the “market”) would not pay full price for a returned car. Relying on the “market” rather than your personal preferences, what should you tell the dealer in order to maximize your benefits from your purchase?
4. Suppose you plan to buy a brand new car for $25,000. When you do to the car dealership to make your purchase, you notice that there is a car on the lot that looks brand new but not longer has the sticker price on it. The dealer says it was returned by someone after driving it only 100 miles. You like the color and ask if you can buy it. The dealer, seeing that you’re so interested, says he’ll sell it to you for the same price as a brand new car that has never been sold. You’re willing to buy it at full price, and do not mind one bit that someone else used it briefly and returned it. But you notice that other people (the “market”) would not pay full price for a returned car. Relying on the “market” rather than your personal preferences, what should you tell the dealer in order to maximize your benefits from your purchase?
5. Explain why the shape of an indifference curve for two goods that are perfect substitutes is a straight line going from the upper left down to the lower right. Extra credit: why must its slope be negative 1?
Redo these questions:
Redo these questions:
6. Suppose you manage a golf course for profit. You poll your customers and find that, each month, they value their first game at $30, their second game at $20, their third at $10, fourth at $0, and refuse to play any more in the same month. It is impractical to charge based on whether someone has previously played a round this month. How do you best charge your customers?
6. Suppose you manage a golf course for profit. You poll your customers and find that, each month, they value their first game at $30, their second game at $20, their third at $10, fourth at $0, and refuse to play any more in the same month. It is impractical to charge based on whether someone has previously played a round this month. How do you best charge your customers?