Question

You want to maximize your utility. Here is your table:

Jack in the Box drink: $1.00

Jumbo Jack with cheese: $5.00

Drink    Total Utility                  Jumbo Jack                         Total Utility

0          0                                               0                                               0

1          100                                          1                                              600

2          220                                          2                                              1100

3          280                                          3                                              1500

4          330                                          4                                              1600

5          350                                          5                                              1650

1) What is the Average Utility for 2 drinks?

2) What is the Marginal Utility for 4 drinks?

3) What is the Average Utility for 1 Jumbo Jack?

4) What is the Marginal Utility for 5 Jumbo Jacks?

5) What is the MU/P for 3 drinks?

6) What is the MU/P for 3 Jumbo Jacks?

7) If you have $25.00 in your purse/wallet, what is the Consumer Optimum?

Answer 1

1) Ans: The Average Utility for 2 drinks is 110

Explanation:

Average Utility = Total utility / Quantity

The Average Utility for 2 drinks = 220 / 2 = 110

2.Ans: The Marginal Utility for 4 drinks is 50

Explanation:

Marginal Utility = Change in total utility / Change in Quantity

Marginal Utility for 4 drinks = ( 330 - 280) / ( 4 - 3) = 50 / 1 = 50

3.Ans: The Average Utility for 1 Jumbo Jack is 600

Explanation:

Average Utility = Total utility / Quantity

Average Utility for 1 Jumbo Jack = 600 / 1 = 600

4.Ans: The Marginal Utility for 5 Jumbo Jacks is

Explanation:

Marginal Utility = Change in total utility / Change in Quantity

Marginal Utility for 5 Jumbo Jacks = ( 1650 - 1600) / ( 5 - 4) = 50 / 1 = 50

5.Ans: The MU/P for 3 drinks is 60

6.Ans: The MU/P for 3 Jumbo Jacks is 80

7.Ans: Consumer's optimum at 5 jumbo Drinks and 4 jumbo Jacks.

Explanation:

Utility maximization condition is where ;

Entire given money outlay must be spent on both the goods.
MUx / Px = MUy /Py
Budget constraint;

Y = Px * Qx + Py * Qy

$25 = ( $1 * 5 ) + ( $5 * 4)

Jumbo Drink	Total Utility	Marginal Utility	MU/P	Jumbo Jack	Total Utility	Marginal Utility	MU/P
0	0	--	--	0	0	--	--
1	100	100	100	1	600	600	120
2	220	120	120	2	1100	500	100
3	280	60	60	3	1500	400	80
4	330	50	50	4	1600	100	20
5	350	20	20	5	1650	50	10