Question

Video Games Marginal Utility Total Utility Marginal Utility/Price 140 240 305 350 380 390 Complete each of the tables above. Does Frankie experience diminishing marginal utility with both video games and dinners out? Briefly explain your answer. Find the combination of video games and dinners that maximizes Frankie's utility. Briefly explain how you derived your answer.

Answer 1

A.

10 Dinners Video Games lolltu mu mulb la Itu mu molp o || 100 100 | 2011 | 140 | 140 | 14 2 || 180 180 16 240 100 31 240 3 | 305 65 | 6.5 290 So 350 45 330 40 8 380 30 3 360 30 6 390 10 i 380 20 390 10 60 4.5

B. Yes, Frankie experiences diminishing marginal utility in both goods. We know that because as Quantity rises, Marginal utility falls.

C. Optimal bundle is when MUx/Px=MUy/Py is met

And the budget constraint is satisfied.

Budget constraint= 10* video game+ 5* dinner= $40

When Frankie consumes 4 dinners and 2 video games MU/P= 10.

10*2+5*4= 40

So both conditions are met.

Optimal Bundle is when Dinner=4, Video games=2.