Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea. The price of a pineapple is $4 and the price of a bottle of green tea is $2. The table below shows Arnie's utility values
Use the table to answer the questions that follow the table
Quantity of Pineapples Total Utility Marginal Utility Marginal Utility per Dollar Quantity of Green Tea Total Utility Marginal Utility Marginal Utility per Dollar
1 32 1 28
2 52 2 46
3 64 3 54
4 68 4 60
5 70 5 64
6 71 6 66
7 71 7 67
a. Complete the table by filling in the blank spaces.
b. Suppose Arnold purchases 4 pineapples and 2 bottles of green tea. Is he consuming the optimal consumption bundle? If so, explain why. If not, what combination should he buy and why?
a.
Quantity of Pineapples Total Utility Marginal Utility Marginal Utility per Dollar Quantity of Green Tea Total Utility Marginal Utility Marginal Utility per Dollar
1 32 32 8 1 28 28 14
2 52 20 5 2 46 18 9
3 64 12 3 3 54 8 4
4 68 4 1 4 60 6 3
5 70 2 0.5 5 64 4 2
6 71 1 0.25 6 66 2 1
7 71 0 0 7 67 1 0.5
b. If Arnold purchases 4 pineapples and 2 bottles of green tea, he is not maximizing his utility. The marginal utility per dollar spent on pineapples = 1 and the marginal utility per dollar spent on green tea = 9. His total utility from this bundle is 114 utils. If he buys 3 pineapples and 4 bottles of green tea, he will equate his marginal utilities per dollar and the total utility from this bundle = 124.
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