Question

Question 1 (1 point)

You have $5 and you're faced with a choice of $1 Tacos or $2 Chicken Nuggets. Each has it's own diminishing marginal utility. On a separate paper calculate MU/$, etc. What is the best combination of food to maximize your utility? And how many Utils would you get?

Qty	$2 Chicken Utils	$1 Tacos Utils
1	8	7
2	16	10
3	22	12
4	24	14

a	4 tacos & 1 chicken nuggets: 51 Utils
b	1 chicken nuggets & 2 tacos: 25 Utils
c	5 tacos: 16 Utils
d	1 taco & 2 chicken nuggets: 23 Utils

Question 2 (1 point)

You have $10 and faced with a choice of $3 Reeses peanut butter cups and $2 Snickers. What combination should you buy and how many Utis would you receive?

Qty	Total Reeses Util	Total Snickers Util
1	4	7
2	8	12
3	10	14
4	11	15

a	1 Reeses + 3 Snickers: 60 Utils
b	2 Reeses + 2 Snickers: 88 Utils
c	3 Reeses + 1 Snickers: 72 Utils
d	2 Reeses + 2 Snickers: 20 Utils

Answer 1

1. d. 1 taco & 2 chicken nuggets: 23 Utils

reason:

	Chicken Nuggets ($2)	Tacos ($1)
Quantity	MU	MU/$	MU	MU/$
1	8	4	7	7
2	8	4	3	3
3	6	3	2	2
4	2	1	2	2

Income = $5

As we see in the table, I will first buy 2 units of chicken nuggets (8 MU/$ is the highest), and then 1 unit of Tacos (7 MU/$). So, $2*2+$1*1 = $5. My income is spent. A total of 23 utils (16 for chicken nuggets and 7 for tacos)

2. d. 2 Reeses + 2 Snickers: 20 Utils

reason:

	Reeses ($3)	Snickers ($2)
Quantity	MU	MU/$	MU	MU/$
1	4	1.33	7	3.5
2	4	1.33	5	2.5
3	2	0.67	2	1
4	1	0.33	1	0.5

Income = $10

First I will choose 2 units of Snickers (3.5 and 2.5 Mu/$ respectively), and then 2 units of Reeses peanut butter cup (1.33 MU/$ each). That will exhaust my income. I will have spent $3*2+$2*2 = $10. Total 20 utils (8 utils from Reeses and 12 utils from Snickers = 20 utils)