Lilly Davis has $5 per week to spend on any combination of ice cream and candy. The price of an ice cream cone is $2 and the price of a candy bar is $1. The table below shows Lilly's utility values. Use the table to answer the questions that follow the

table.

Quantity of Ice Cream Cones Total Utility Marginal Utility Marginal Utility per Dollar Quantity of Candy Total Utility Marginal Utility
1 20 1 20
2 38 2 38
3 52 3 48
4 62 4 54

a. Complete the table by filling in the blank spaces.
b. Suppose Lilly purchases 2 ice cream cones and 1 candy bar. Is she consuming the optimal consumption bundle? If so, explain why. If not, what combination should she buy and why?

What will be an ideal response?

a.
Quantity of Ice Cream Cones Total Utility Marginal Utility Marginal Utility per Dollar Quantity of Candy Total Utility Marginal Utility
1 20 20 10 1 20 20
2 38 18 9 2 38 18
3 52 14 7 3 48 10
4 62 10 5 4 54 6

b. If Lilly purchases 2 ice cream cones and 1 candy bar she is not maximizing her utility. The marginal utility per dollar spent on ice cream cones = 9 and marginal utility per dollar spent on candy bars = 20. Her total utility from this bundle is 58 utils. If she buys 1 ice cream cone and 3 candy bars, she will equate her marginal utilities per dollar and the total utility from this bundle = 68.