Complete Table 19.3 below.Assume the price of cola is $8 per unit and the price of pretzels is $4 per unit.
$\begin{array}{llllll}
\text { Units of}&\text { TU of}&\text {MU of }&\text { Units of}&\text {TU of }&\text {MU of }\
\text {Cola }&\text { Cola}&\text {Cola }&\text {Pretzels }&\text { Pretzels}&\text {Pretzels }\
\hline 1&40&40&1&30&30\2&\_\_\_&32&2&\_\_\_&20\3&96&24&2&66&16\4&112&\_\_\_&5&84&\_\_\_&
\end{array}$
Table 19.3
Michael's Utility Schedule Refer to Table 19.3.Suppose Michael has $28 to spend on cola and pretzels.What combination should he purchase in order to maximize his utility?
A) Three colas and four pretzels.
B) One cola and five pretzels.
C) Three colas and one pretzel.
D) Two colas and three pretzels.

Question

Complete Table 19.3 below.Assume the price of cola is $8 per unit and the price of pretzels is $4 per unit.
$\begin{array}{llllll}
\text { Units of}&\text { TU of}&\text {MU of }&\text { Units of}&\text {TU of }&\text {MU of }\
 \text {Cola }&\text { Cola}&\text {Cola }&\text {Pretzels }&\text { Pretzels}&\text {Pretzels }\
\hline 1&40&40&1&30&30\2&\_\_\_&32&2&\_\_\_&20\3&96&24&2&66&16\4&112&\_\_\_&5&84&\_\_\_&
\end{array}$
Table 19.3
Michael's Utility Schedule Refer to Table 19.3.Suppose Michael has $28 to spend on cola and pretzels.What combination should he purchase in order to maximize his utility?
A) Three colas and four pretzels.
B) One cola and five pretzels.
C) Three colas and one pretzel.
D) Two colas and three pretzels.

Quizplus · Accepted Answer

To maximize utility given a budget constraint, Michael should equate the marginal utility per dollar spent on each good. The marginal utility per dollar for cola is MU of Cola / Price of Cola, and for pretzels, it's MU of Pretzels / Price of Pretzels. From the table, the MU for the second cola is 32 and for the third pretzel (since the MU for the second pretzel is 20 and decreases), it would be lower than 20, making the second cola and third pretzel the last units where comparison is relevant. Given the prices ($8 for cola and $4 for pretzels), the MU per dollar for cola at 32 MU is 4 (32/8), and for pretzels at 20 MU is 5 (20/4). To maximize utility, Michael should buy until the MU per dollar equalizes or his budget is exhausted. Starting with the highest MU per dollar, he would first allocate budget to pretzels but also needs to consider cola for utility maximization. Given his $28 budget, buying two colas ($16) and three pretzels ($12) exactly exhausts his budget and aligns with maximizing the marginal utility per dollar spent across both goods.

Complete Table 19 Table 193 Michael's Utility Schedule Refer to Table 19

Complete Table 19 Table 193
Michael's Utility Schedule Refer to Table 19