NARRBEGIN: Exhibit 6-7
Exhibit 6-7

-Suppose you have $30 to spend on either bowling or billiards. A game of billiards costs you $4, and bowling costs $2 per game. Using the information in Exhibit 6-7, determine the utility-maximizing combination of bowling and billiards.
A) four billiards games, four games of bowling
B) five billiards games, two games of bowling
C) three billiards games, eight games of bowling
D) five billiards games, five games of bowling
E) twelve games of bowling

Question

NARRBEGIN: Exhibit 6-7
Exhibit 6-7
 
-Suppose you have $30 to spend on either bowling or billiards. A game of billiards costs you $4, and bowling costs $2 per game. Using the information in Exhibit 6-7, determine the utility-maximizing combination of bowling and billiards.
A) four billiards games, four games of bowling 
B) five billiards games, two games of bowling 
C) three billiards games, eight games of bowling 
D) five billiards games, five games of bowling 
E) twelve games of bowling

Quizplus · Accepted Answer

To determine the utility-maximizing combination, we need to compare the marginal utilities per dollar spent on each activity. The marginal utility per dollar for billiards is 10/4 = 2.5, while the marginal utility per dollar for bowling is 24/30 = 0.8. Since the marginal utility per dollar for billiards is higher than for bowling, we should choose to spend more on billiards. From the options given, the combination of five billiards games and five games of bowling gives us the highest total utility: 12 (utility from billiards) + 40 (utility from bowling) = 52.

NARRBEGIN: Exhibit 6-7 Exhibit 6-7