A utility function is given as where B represents the quantity of books consumed and M...

A utility function is given as

$\mathrm{U}=\sqrt{\mathrm{MB}}$

where B represents the quantity of books consumed and M represents magazines. This utility is shown via indifference curves in the diagram to the right.

The level of utility at point V is _______ (round your answer to one decimal place).

The marginal utility when moving from bundle T to bundle V is _______ (round your answer to two decimal places)

Solutions

Expert Solution

At point V, B = 20 and M= 20.

Thus, utility = (20x20)^1/2 = 20.

Utility at bundle T = (15X20)^1/2 = 17.32 and Utility at V = 20.

Thus, marginal utility (additional utility from adding another bundle) in moving from T to V = 20 - 17.32 = 2.68

Rahul Sunny answered 1 year ago

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