Professor Makrung spends his entire weekly income of $700 on economics books (E)and coffee (C).The price of an economics book (P_E)is $50,and the price of a cup of coffee (P_C)is $2.If the professor buys 10 economics books and 50 cups of coffee per week,he finds that MU_E = 75 and MU_C = 3.This implies that a consumption bundle consisting of 10 economics books and 50 cups of coffee per week maximizes the professor's utility.

Question

Quizplus · Accepted Answer

Given the prices and quantities of economics books and coffee, along with their marginal utilities, we can calculate the marginal utility per dollar for each good (MU/P). For economics books, MU/P = 75/50 = 1.5. For coffee, MU/P = 3/2 = 1.5. Although the marginal utility per dollar spent on each good is equal, which is a condition for utility maximization, the statement doesn't provide enough information to conclusively say this bundle maximizes the professor's utility without knowing his utility function or if other combinations might yield higher total utility.

Professor Makrung Spends His Entire Weekly Income of $700 on Economics