Jamie's marginal utility from muffins and from doughnuts (in utils) is shown below. Jamie spends a total of $8 on muffins and/or doughnuts every morning. The price of each muffin is $2 and the price of each doughnut is $1. $$\begin{array} { | c | c | c | c | }
\hline \begin{array} { c }
\text { Muffins } \
\text { Per Day }
\end{array} & \begin{array} { c }
\text { Marginal Utility } \
\text { Per Muffin }
\end{array} & \begin{array} { c }
\text { Doughnuts } \
\text { Per Day }
\end{array} & \begin{array} { c }
\text { Marginal Utility } \
\text { Per Doughnut }
\end{array} \
\hline 1 & 40 & 2 & 20 \
\hline 2 & 30 & 4 & 15 \
\hline 3 & 20 & 6 & 10 \
\hline
\end{array}$$ What is Jamie's optimal combination of muffins and doughnuts each day?
A)1 muffin, 6 doughnuts
B)2 muffins, 4 doughnuts
C)3 muffins, 2 doughnuts
D)4 muffins, zero doughnuts

Question

Jamie's marginal utility from muffins and from doughnuts (in utils) is shown below. Jamie spends a total of $8 on muffins and/or doughnuts every morning. The price of each muffin is $2 and the price of each doughnut is $1. $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Muffins } \
\text { Per Day }
\end{array} & \begin{array} { c } 
\text { Marginal Utility } \
\text { Per Muffin }
\end{array} & \begin{array} { c } 
\text { Doughnuts } \
\text { Per Day }
\end{array} & \begin{array} { c } 
\text { Marginal Utility } \
\text { Per Doughnut }
\end{array} \
\hline 1 & 40 & 2 & 20 \
\hline 2 & 30 & 4 & 15 \
\hline 3 & 20 & 6 & 10 \
\hline
\end{array}$$ What is Jamie's optimal combination of muffins and doughnuts each day?
A)1 muffin, 6 doughnuts
B)2 muffins, 4 doughnuts
C)3 muffins, 2 doughnuts
D)4 muffins, zero doughnuts

Quizplus · Accepted Answer

To find Jamie's optimal combination, we need to compare the marginal utility per dollar of each good.

For muffins: 
- Marginal utility per dollar of the first muffin = 40/2 = 20 utils per dollar
- Marginal utility per dollar of the second muffin = 30/2 = 15 utils per dollar
- Marginal utility per dollar of the third muffin = 20/2 = 10 utils per dollar

For doughnuts:
- Marginal utility per dollar of the first doughnut = 20/1 = 20 utils per dollar
- Marginal utility per dollar of the second doughnut = 15/1 = 15 utils per dollar
- Marginal utility per dollar of the third doughnut = 10/1 = 10 utils per dollar

From this analysis, we can see that the marginal utility per dollar decreases for both goods as more units are consumed. However, the marginal utility per dollar of the first doughnut is higher than that of the first muffin. Therefore, Jamie should consume more doughnuts and fewer muffins to maximize total utility.

The combination of 2 muffins and 4 doughnuts costs $2*2 + $1*4 = $8 and provides a total utility of 30+30+20+20+20+20 = 140 utils. This is the maximum possible total utility that can be obtained with $8. Therefore, the optimal combination is 2 muffins and 4 doughnuts.

Hence, the answer is B.

Jamie's Marginal Utility from Muffins and from Doughnuts (In Utils)