2. Suppose that (as stated in several Problems at the end of Chapter 8 of our...

2. Suppose that (as stated in several Problems at the end of Chapter 8 of our text) Max spends his entire daily income of $35 on two activities, windsurfing or snorkeling. The prices to rent the equipment for windsurfing and snorkeling are $10 and $5, respectively. Max’s total utility (TU) from each of these activities is illustrated in the table below.

Hours Total Utility Marginal Utility Total Utility Per Day from Windsurfing from Windsurfing from Snorkeling

000 1120 40 2220 76

3 300 106
4 360 128
5 396 140
6 412 150
7 422 158

Marginal Utility from Snorkeling

Expert Solution

From the given data, it is clear that Max will buy 3 hours of windsurfing and 1 hour of snorkeling.

reason: The table of Marginal utility and M per dollar is given below:

He will choose his preferences as follows:

Total expenditure = $35
Total utility = 380

Rahul Sunny answered 2 years ago

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