Table 7.8
-Refer to Table 7.8.Jessy spends no more than $75 per month on movies and meals out.Movies cost $8 each and a meal out costs $15.If Jessy wants to maximize her utility,she should choose ________ movies and ________ meals out.
A) 0; 5
B) 1; 4
C) 4; 2
D) 3; 3

Question

Table 7.8
-Refer to Table 7.8.Jessy spends no more than $75 per month on movies and meals out.Movies cost $8 each and a meal out costs $15.If Jessy wants to maximize her utility,she should choose ________ movies and ________ meals out.
A) 0; 5 
B) 1; 4 
C) 4; 2 
D) 3; 3

Quizplus · Accepted Answer

Let's start with setting up Jessy's budget constraint:

8m + 15f ≤ 75

where m is the number of movies and f is the number of meals out.

Now, in order to maximize her utility, Jessy needs to allocate her budget in a way that the marginal utility per dollar spent is equal for movies and meals out:

MUm/Pm = MUf/Pf

where MUm and MUf are the marginal utilities of movies and meals out, and Pm and Pf are their respective prices.

Assuming that the marginal utility of movies and meals out are constant and equal at all quantities, we can simplify the equation to:

8/Pm = 15/Pf

which means that for each dollar spent on movies, Jessy should spend 1.875 dollars on meals out.

Now, let's use this information to solve for the optimal combination of movies and meals out. One possible method is to use substitution:

8m + 15f = 75

8m + (8/1.875)m = 75

m ≈ 3.12

f ≈ 2.52

Since Jessy cannot buy a fractional number of movies or meals out, we need to round down to the nearest integer for both quantities. Therefore, Jessy should choose 3 movies and 3 meals out, which would cost her a total of $69.

Table 7.8 -Refer to Table 7.8.Jessy Spends No More Than $75 Per