(Table: Marginal Utility Schedule for Joachim) Joachim has $72 available to spend on movie tickets, hamburgers, socks, and tissues. Given his marginal utility schedules for these items, what mix of goods will he buy if he seeks to maximize utility? (Note that he may or may not have $1 left over.)
$\begin{array}{|l|c|c|c|c|}
\hline & \begin{array}{c}
M U \text { movie ticket } \
P=\$ 10
\end{array} & \begin{array}{c}
M U \text { hamburger } P= \
\$ 5
\end{array} & \begin{array}{c}
M U \text { pair of socks } \
P=\$ 4
\end{array} & \begin{array}{c}
M U \text { box of tissues } \
P=\$ 3
\end{array} \
\hline \text { 1st } & 30 & 17 & 6 & 3 \
\hline \text { 2nd } & 25 & 12.5 & 3 & 2 \
\hline \text { 3rd } & 18 & 10 & 1 & 1 \
\hline \text { 4th } & 8 & 4 & 0 & 0 \
\hline 5 \text { th } & 0 & 0 & & \
\hline
\end{array}$
A) three movie tickets, four hamburgers, four pairs of socks, and two boxes of tissues for a total of $72
B) four movie tickets, three hamburgers, four pairs of socks, and no boxes of tissues for a total of $71
C) four movie tickets, four hamburgers, two pairs of socks, and one box of tissues for a total of $71
D) three movie tickets, four hamburgers, three pairs of socks, and three boxes of tissues for a total of $71

Question

Quizplus · Accepted Answer

To maximize utility, Joachim should purchase items in a way that equalizes the marginal utility per dollar spent across all goods. Calculating the marginal utility per dollar for each item (MU/Price) for the first unit: movie ticket = 30/10 = 3, hamburger = 17/5 = 3.4, pair of socks = 6/4 = 1.5, box of tissues = 3/3 = 1. The best initial choice is a hamburger for the highest MU per dollar. Continuing this process and considering the budget constraint, the combination that maximizes utility within the $72 budget is four movie tickets ($40), four hamburgers ($20), two pairs of socks ($8), and one box of tissues ($3), totaling $71.

(Table: Marginal Utility Schedule for Joachim) Joachim Has $72 Available