Joe has $55 to spend on apples and oranges. Given the information in the following table, is Joe maximizing utility?MarginalUtility of LastUnitProduct Price$0.50ApplesOranges $0.75Quantity50 lbs.40 lbs.Joe's marginal utility per dollar spent on apples isJoe's marginal utility per dollar spent on oranges isThe total amount of his income Joes spends on apples and oranges isTotalUtility1,0001,200units of utility per dollar.units of utility per dollar.dollars.2030

The Equimarginal PrincipleThe equimarginal principle explains that for an individual to maximize…

Joe has $55 to spend on apples and oranges. Given the information in the following table, is Joe maximizing utility? Marginal Utility of Last Unit Product Apples Oranges $0.75 Price $0.50 Quantity 50 lbs. 40 lbs. Total Utility 1,000 1,200 Joe's marginal utility per dollar spent on apples is units of utility per dollar. Joe's marginal utility per dollar spent on oranges is units of utility per dollar. The total amount of his income Joes spends on apples and oranges is dollars. 20 30

Joe has $55 to spend on apples and oranges. Given the information in the following table, is Joe maximizing utility? Marginal Utility of Last Unit Product Apples Oranges $0.75 Price $0.50 Quantity 50 lbs. 40 lbs. Total Utility 1,000 1,200 Joe's marginal utility per dollar spent on apples is units of utility per dollar. Joe's marginal utility per dollar spent on oranges is units of utility per dollar. The total amount of his income Joes spends on apples and oranges is dollars. 20 30

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 8P

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Similar questions

Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a roundâ€”trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.
Praxilla, who lived in ancient Greece, derives utility from reading poems and from eating cucumbers. Praxilla gets 30 units of marginal utility from her first poem 27 units of marginal utility from her second poem 24 units of marginal utility from her third poem, and so on, with marginal utility declining by three units for each additional poem. Praxilla gets six units of marginal utility for each of her next three cucumbers consumed, five units of marginal utility for each of her next three cucumbers consumed, four units of marginal utility for each of the following three cucumbers consumed, and so on, with marginal utility declining by one for every three cucumber consumed. A poem costs three bronze coins hut a cucumber costs only one bronze coin. Praxilla has 18 bronze coins. Sketch Praxillas budget set between poems and cucumbers, placing poems on the vertical axis and cucumbers on the horizontal axis. Start off with the choice of zero poems and 18 cucumbers, and calculate the changes in marginal utility of moving along the budget line to the next choice of one poem and 15 cucumbers. Using this step-by-step process based on marginal utility, create a table and identify Praxillas utilityâ€”maximizing choice. Compare the marginal utility of the two goods and the relative prices at the optimal choice to see if the expected relationship holds. Hint: Label the table columns: 1) Choice, 2} Marginal Gain from More Poems, 3) Marginal Loss from Fewer Cucumbers, 4) Overall Gain or Loss, 5) Is the previous choice Optimal? Label the table rows: 1) 0 Poems and 18 Cucumbers, 2) 1 Poem and 15 cucumbers, 3) 2 Poems and 12 cucumbers, 4) 3 Poems and 9 Cucumbers, 5) 4 Poems and 6 cucumbers 6) 5 Poems and 3 Cucumbers, 7) 6 Poems and 0 Cucumbers.
Would you expect total utility to rise or fall with additional consumption of a good? Why?
Is it possible for total utility to increase while marginal utility diminishes? Explain.