Reid has the following utility function. U = 24m1/3d1/2 where U is Reid's total utility, m is the quantity of muffin consumed, and d is the quantity of doughnuts consumed. Reid has a budget of $25.00, the price of a muffin is $1.00 and the price of doughnut is $0.60. a. What is the equation for the marginal utility Reid receives from muffins? What is the equation for the marginal utility Reid receives from doughnuts? b. What is the equation for the marginal rate of substitution, MRSm,d? Is Reid's utility function subject to the law of the diminishing marginal rate of substitution? c. Reid has a $15.00 gift card that can only be used to buy doughnuts and $10.00 cash to spend on either of the two goods. The price of a doughnut is $0.60 and the price of a muffin is $1.00. Using equations, determine, determine Reid's optimal combination of muffins and doughnuts given the cash and gift card.
Reid has the following utility function.
U = 24m1/3d1/2
where U is Reid's total utility, m is the quantity of muffin consumed, and d is the quantity of doughnuts consumed. Reid has a budget of $25.00, the price of a muffin is $1.00 and the price of doughnut is $0.60.
a. What is the equation for the
b. What is the equation for the marginal rate of substitution, MRSm,d? Is Reid's utility function subject to the law of the diminishing marginal rate of substitution?
c. Reid has a $15.00 gift card that can only be used to buy doughnuts and $10.00 cash to spend on either of the two goods. The price of a doughnut is $0.60 and the price of a muffin is $1.00. Using equations, determine, determine Reid's optimal combination of muffins and doughnuts given the cash and gift card.
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