Suppose the Only Characteristic of Beer That a Consumer Cares $x _ { 1 }$

question 5

Essay

Suppose the only characteristic of beer that a consumer cares about is alcohol content.Currently,Bud Light and Miller Lite have the same alcohol content.
a.Using
$x _ { 1 }$ to denote ounces of Miller Lite and
$x _ { 2 }$ to denote ounces of Bud Light,what's the simplest possible utility function that can describe this consumer's tastes over the two products.
b.Suppose Bud Light lowers its alcohol content by 50%.How would you change the utility function to account for this?
c.Derive the MRS for the functions in (a)and (b)--- and interpret your answer.

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Definitions:

Variable Cost

Costs that change in proportion with the level of production or business activity, such as materials and labor directly involved in production.

Activity

Refers to any action or task performed within an organization that consumes resources.

Relevant Range

The range of activity over which a company expects its operating assumptions, such as cost behavior and sales mix, to remain valid, influencing budgeting and financial planning.

Fixed Costs

Costs that do not vary with the level of production or business activity, remaining constant even when output changes.