Asked by Taylor Johnson Mathias on Jul 11, 2024
Verified
See Scenario 4.1. What quantity Qc will maximize Daniel's utility given the information above?
A) 0
B) 24
C) 40
D) 60
E) none of the above
Marginal Utility
The change in satisfaction or utility gained from consuming an additional unit of a good or service.
Utility Maximizing
The process by which individuals select the mix of goods and services that maximizes their satisfaction or utility, given their budget constraint.
- Understanding the foundations of utility theory, including marginal utility and how it guides consumer choice.
Verified Answer
TM
The mail blastJul 15, 2024
Final Answer :
C
Explanation :
To maximize utility, Daniel should allocate his income in such a way that the marginal utility per dollar spent on both goods is the same:
MUc/Pc = MUd/Pd
Substituting the given marginal utility functions and prices, we get:
Qd/3 = Qc/3
Simplifying this expression, we get:
Qd = Qc
Now, using the budget constraint:
3Qc + 3Qd = 240
Substituting Qd = Qc, we get:
6Qc = 240
Qc = 40
Therefore, the quantity of cake that will maximize Daniel's utility is 40.
MUc/Pc = MUd/Pd
Substituting the given marginal utility functions and prices, we get:
Qd/3 = Qc/3
Simplifying this expression, we get:
Qd = Qc
Now, using the budget constraint:
3Qc + 3Qd = 240
Substituting Qd = Qc, we get:
6Qc = 240
Qc = 40
Therefore, the quantity of cake that will maximize Daniel's utility is 40.
Learning Objectives
- Understanding the foundations of utility theory, including marginal utility and how it guides consumer choice.