Table 10-6

Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 10-6.If Jay can eat all the burgers he wants for free, how many burgers will he consume?
A)7 burgers
B)6 burgers
C)5 burgers
D)3 burgers

Question

Table 10-6
  
Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 10-6.If Jay can eat all the burgers he wants for free, how many burgers will he consume?
A)7 burgers 
B)6 burgers 
C)5 burgers 
D)3 burgers

Quizplus · Accepted Answer

Jay's marginal utility per dollar for burgers declines as he consumes more burgers. It starts at 20, drops to 15 for the second burger, 10 for the third burger, and 5 for the fourth burger. Therefore, Jay will consume 4 burgers because at that point the marginal utility per dollar is no longer positive. However, he can still afford 1 can of Pepsi with his remaining $1. Therefore, his total utility-maximizing bundle will be 4 burgers and 1 can of Pepsi, which yields a total utility of 85 (20+15+10+5+35). This choice uses up all of Jay's $7 budget.

Table 10-6 Table 10-6 Lists Jay's Marginal Utilities for Burgers and Pepsi