The relationship between the marginal utility that Casey gets from eating ice cream sundaes and the number of ice cream cones he eats per week is as follows: Casey receives 3 units of utility from the last dollar spent on each of the other goods he consumes. If ice cream sundaes cost $4 each, how many ice cream sundaes will he consume per month if he maximizes utility?
A) 2
B) 3
C) 4
D) 5

Question

The relationship between the marginal utility that Casey gets from eating ice cream sundaes and the number of ice cream cones he eats per week is as follows:  Casey receives 3 units of utility from the last dollar spent on each of the other goods he consumes. If ice cream sundaes cost $4 each, how many ice cream sundaes will he consume per month if he maximizes utility?
A) 2 
B) 3 
C) 4 
D) 5

Quizplus · Accepted Answer

To maximize utility, Casey should consume ice cream sundaes until the marginal utility per dollar spent on ice cream sundaes equals the marginal utility per dollar spent on the other goods he consumes. From the table, we see that the marginal utility per dollar spent on ice cream sundaes is highest at the third sundae, when it is 48. The marginal utility per dollar spent on the other goods is 3.

Therefore, Casey will consume 3 ice cream sundaes per week, which equals 12 per month, since he gets 48 units of utility for spending $12 on sundaes each week.

The Relationship Between the Marginal Utility That Casey Gets from Eating