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denausor denausor
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3 weeks ago
Marginal Utility per Dollar

At Marcia's consumer equilibrium, she purchases 1 diamond and 5,840 bottles of water a year. If the price of diamonds is $7000 and the price of water is $0.75 and the total utility from purchasing one diamond is 11,840, what is the marginal utility Marcia receives from the 5,840th bottle of water? Please round your final answer to two decimal places.

▸ 11,840

▸ 1.27

▸ 7416.8

▸ 0.44
Textbook 

Macroeconomics


Edition: 3rd
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frithnefrithne
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3 weeks ago
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More solutions for this book are available here
1.27

At consumer equilibrium, the marginal utility per dollar spent is equivalent for all goods.
Therefore, MU of diamonds/PriceDiamonds = MU of water/PriceWater
Because Marcia only purchases one diamond, total utility from that diamond is equal to the marginal utility of that diamond.
11,840/7000 = MU of water/0.75
0.75*11,840/7000 = MU of water = 1.27
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