Silirts (B0 A consumption bundle is a pair (r1, x2), where r, > 0 is the quantity of cigars and a s the quantity of sleeveless shirts (for simplicity, assume these goods can be measu rbitrary-not just integer-quantities). a) Suppose Kreese's preferences are monotone (more is better) and that he is willing t up one sleeveless shirt in exchange for three cigars. Find a utility function represe his preferences. b) Through trial and error, Kreese has discovered that there are no benefits to sm more than 10 cigars per day. When smoking less than 10 cigars he is still willi exchange one shirt for three cigars, but if he smokes more than ten cigars, there additional benefit and he only gains by owning more shirts. Find a utility fum

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter10: Consumer Choice Theory
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Kreese derives utility from two types of goods: cigars (good 1) and sleeveless shirts (good 2).
A consumption bundle is a pair (r1, x2), where r, > 0 is the quantity of cigars and r2 2 0
is the quantity of sleeveless shirts (for simplicity, assume these goods can be measured in
arbitrary-not just integer-quantities).
(a) Suppose Kreese's preferences are monotone (more is better) and that he is willing to give
up one sleeveless shirt in exchange for three cigars. Find a utility function representing
his preferences.
(b) Through trial and error, Kreese has discovered that there are no benefits to smoking
more than 10 cigars per day. When smoking less than 10 cigars he is still willing to
exchange one shirt for three cigars, but if he smokes more than ten cigars, there is no
additional benefit and he only gains by owning more shirts. Find a utility function
describing these preferences.
Transcribed Image Text:Kreese derives utility from two types of goods: cigars (good 1) and sleeveless shirts (good 2). A consumption bundle is a pair (r1, x2), where r, > 0 is the quantity of cigars and r2 2 0 is the quantity of sleeveless shirts (for simplicity, assume these goods can be measured in arbitrary-not just integer-quantities). (a) Suppose Kreese's preferences are monotone (more is better) and that he is willing to give up one sleeveless shirt in exchange for three cigars. Find a utility function representing his preferences. (b) Through trial and error, Kreese has discovered that there are no benefits to smoking more than 10 cigars per day. When smoking less than 10 cigars he is still willing to exchange one shirt for three cigars, but if he smokes more than ten cigars, there is no additional benefit and he only gains by owning more shirts. Find a utility function describing these preferences.
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