2. Suppose the marginal utility of good A is 20 and its price is $4, and the marginal utility of good B is 50 and its price is $5. The individual to whom this information applies is spending $20 on each good. Is he or she maximizing satisfaction? If not, what should the individual do to increase total satisfaction? On the basis of this information, can you pick an optimum combination? Why or why not?
2. Suppose the marginal utility of good A is 20 and its price is $4, and the marginal utility of good B is 50 and its price is $5. The individual to whom this information applies is spending $20 on each good. Is he or she maximizing satisfaction? If not, what should the individual do to increase total satisfaction? On the basis of this information, can you pick an optimum combination? Why or why not?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I need help with question 2 please
Transcribed Image Text:Numerical Problems
1. The table shows the total utility Joseph derives from eating pizza in the evening while study-
ing.
Pieces of pizza/evening Total Utility
30
2
48
60
70
78
80
7
76
a. How much marginal utility does Joseph derive from the third piece of pizza?
b. After eating how many pieces of pizza does marginal utility start to decline?
c. If the pizza were free, what is the maximum number of pieces Joseph would eat in an
evening?
d. On separate diagrams, construct Joseph's total utility and marginal utility curves for
pizza. Does the law of diminishing marginal utility hold? How do you know?
2. Suppose the marginal utility of good A is 20 and its price is $4, and the marginal utility of
good B is 50 and its price is $5. The individual to whom this information applies is spending
$20 on each good. Is he or she maximizing satisfaction? If not, what should the individual
do to increase total satisfaction? On the basis of this information, can you pick an optimum
combination? Why or why not?
4)
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