(7 points) Suppose Backbeat BBQ, Dave Grohl's one-man catering company, offers two types of membershipplans. Plan A has an entry fee of $20 with a price of $2 per unit. Plan B has an entry fee of $40 with a price of $1per unit for using the service. Let x be expenditure on all other goods and y be the units of consumption ofBackbeat BBQ's services, and suppose you have an income of $100.A. Write down the budget equation that you would have after you paid the entry fee for each of the two plans.B. If your utility function is xy, how much y would you choose in each case?C. Which plan would you prefer? Explain.

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Answered: (7 points) Suppose Backbeat BBQ, Dave…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 7RQ: Would you expect marginal utility to rise or fall with additional consumption of a good? Why?

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Would you expect marginal utility to rise or fall with additional consumption of a good? Why?
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