Question 9 IbleNext questionThe table shows Wanda's total utility from ice cream and nuts.Ice CreamNutsThe price of an ice cream cone is $2, the price of a bag of nuts is $4,and Wanda has $10 a week to spend.ConesTotalBagsTotalper weekutilityper weekutilityWhen Wanda buys 1 ice cream cone and 2 bags of nuts, she is notmaximizing total utility.16080110130What must Wanda do to maximize total utility?15017541804210200235210255Wanda mustO A. increase her budgetO B. decrease consumption of the good with the higher marginalutility per dollar and increase consumption of the good withthe lower marginal utility per dollarO C. spend all of her budgetD. increase consumption of the good with the higher marginalutility per dollar and decrease consumption of the good withthe lower marginal utility per dollarO123 ¢56O O

Total utility is the total satisfaction derived from consuming the good. Marginal utility is the…

The table shows Wanda's total utility from ice cream and nuts. Ice Cream Nuts The price of an ice cream cone is $2, the price of a bag of nuts is $4, and Wanda has $10 a week to spend. Cones Total Bags Total per week utility per week utility When Wanda buys 1 ice cream cone and 2 bags of nuts, she is not maximizing total utility. 1 60 1 80 110 130 What must Wanda do to maximize total utility? 150 3 175 4 180 4. 210 5 200 235 210 255 Wanda must O A. increase her budget O B. decrease consumption of the good with the higher marginal utility per dollar and increase consumption of the good with the lower marginal utility per dollar OC. spend all of her budget D. increase consumption of the good with the higher marginal utility per dollar and decrease consumption of the good with the lower marginal utility per dollar

The table shows Wanda's total utility from ice cream and nuts. Ice Cream Nuts The price of an ice cream cone is $2, the price of a bag of nuts is $4, and Wanda has $10 a week to spend. Cones Total Bags Total per week utility per week utility When Wanda buys 1 ice cream cone and 2 bags of nuts, she is not maximizing total utility. 1 60 1 80 110 130 What must Wanda do to maximize total utility? 150 3 175 4 180 4. 210 5 200 235 210 255 Wanda must O A. increase her budget O B. decrease consumption of the good with the higher marginal utility per dollar and increase consumption of the good with the lower marginal utility per dollar OC. spend all of her budget D. increase consumption of the good with the higher marginal utility per dollar and decrease consumption of the good with the lower marginal utility per dollar

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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Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
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.
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.
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.