Question

1. The table below contains data about your food budget, and assumes you have $20 to spend. Fill out the entire table, assuming bread is $4 per loaf and cereal is $4 per box: Total Utility Quantity (loaves of bread) Marginal Utility Marginal Utility per Dollar ($4) 0 70 Total and Marginal Utility for Bread and Cereal Marginal Marginal Quantity Total Utility Utility Utility per (boxes of Dollar ($4) cereal) 0 1 50 90 3 120 140 5 160 1 2 125 165 190 200 5 L

Answer 1

Quantity (Loaves of Bread)	Total Utility	Marginal Utility	MUM, Price=$4	MUM, Price=$2	Quantity (boxes of cereals)	TU	MU	MUM, Price=$4	MUM, Price=$2
1	70	70	17.5	8.75	1	50	50	12.5	6.25
2	125	55	13.75	6.875	2	90	40	10	5
3	165	40	10	5	3	120	30	7.5	3.75
4	190	25	6.25	3.125	4	140	20	5	2.5
5	200	10	2.5	1.25	5	160	20	5	2.5

The utility is maximized when MUM of good 1 = MUM of good 2

Question1

3 loaves of bread

Question 2

2 boxes of cereal

Question 3

Diminishing marginal utility

Question 4

3 loaves of bread

Question 5

1 box of cereals

Please hit thumbs up, if you like the solution.