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Tidy Tidy
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Posts: 9704
6 years ago
Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea. The price of a pineapple is $4 and the price of a bottle of green tea is $2. The table below shows Arnie's utility values. Use the table to answer the questions that follow the table.

Quantity of Pineapples   Total Utility   Marginal Utility   Marginal Utility per Dollar   Quantity of Green Tea   Total Utility   Marginal Utility   Marginal Utility per Dollar
        1        32                  1        28      
         2        52                  2        46      
         3        64                  3        54      
         4        68                  4        60      
         5        70                  5        64      
         6        71                  6        66      
         7        71                  7        67      

a.   Complete the table by filling in the blank spaces.
b.   Suppose Arnold purchases 4 pineapples and 2 bottles of green tea. Is he consuming the optimal consumption bundle? If so, explain why. If not, what combination should he buy and why?
Textbook 

Essentials of Economics


Edition: 4th
Authors:
Read 630 times
6 Replies
Repeat after me: 'Calm down. Things are gonna be fine. Things are gonna be all great. Just relax.' Wink Face
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Chimelo46Chimelo46
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Posts: 5639
6 years ago
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More questions for this book are available here
a.
Quantity of Pineapples   Total Utility   Marginal Utility   Marginal Utility per Dollar   Quantity of Green Tea   Total Utility   Marginal Utility   Marginal Utility per Dollar
         1        32           32            8            1        28           28           14
         2        52           20            5            2        46           18             9
         3        64           12            3            3        54             8             4
         4        68             4            1            4        60             6             3
         5        70             2            0.5            5        64             4             2
         6        71             1            0.25            6        66             2             1
         7        71             0            0            7        67             1             0.5

 
b.   If Arnold purchases 4 pineapples and 2 bottles of green tea, he is not maximizing his utility. The marginal utility per dollar spent on pineapples = 1 and the marginal utility per dollar spent on green tea = 9. His total utility from this bundle is 114 utils. If he buys 3 pineapples and 4 bottles of green tea, he will equate his marginal utilities per dollar and the total utility from this bundle = 124.
This verified answer contains over 510 words.
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wrote...
6 years ago
Excellent answer, thank you.
Repeat after me: 'Calm down. Things are gonna be fine. Things are gonna be all great. Just relax.' Wink Face
wrote...
6 years ago
The textbook reference in your signature really helped me narrow it down.

Happy to help Wink Face
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10 months ago
thank you
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Thanks!
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