Suppose that Tim and Terri have the same marginal utility from consuming ice cream cones: 100,50,25,and 12 for the first four cones,respectively.Suppose also that Tim is currently consuming 3 cones,while Terri is consuming none.The transfer of one cone from Tim to Terri would result in an overall ________ in utility equal to ________.

Question

Quizplus · Accepted Answer

Tim's total utility from 3 cones is 100+50+25 = 175.

If he gives up one cone, his total utility would decrease to 100+50 = 150.

Terri's utility from 1 additional cone would be 12.

So, the overall increase in utility would be 12-0 (since Terri has 0 cones currently) = 12.

Therefore, the transfer of one cone from Tim to Terri would result in an overall increase in utility equal to 12, which is represented by choice C (increase;75).

Suppose That Tim and Terri Have the Same Marginal Utility