For each of the following combinations of cheese and fruit, calculate the marginal utility per dollar from the last pound of cheese and the last pound offruit. Then, use the dropdown menus in the last column to indicate which of the combinations satisfy the condition for consumer equilibrium.CombinationABсDCheese(Pounds per Week)20403050MUCPaFruit(Pounds per Week)30203040MUFPConsumer Equilibrium?PPPPSuppose Megan has an "appetizer budget" of $165 per week, which she spends on cheese and fruit. To maximize her utility, Megan will purchasepounds of cheese andpounds of fruit per week. Megan enjoys consuming both cheese and fruit. Each pound of cheese costs Pc = $1, and each pound of fruit costs Pp = $2. Suppose that Meganbuys 30 pounds of cheese and 20 pounds of fruit per week. The following graphs show her marginal utility curves for cheese and fruit. At her currentconsumption level, Megan's marginal utility from consuming the last pound of cheese she bought is MUC = 12 utils per pound, and her marginalutility from consuming the last pound of fruit she bought is MUR = 12 utils per pound.MU OF CHEESE (Utils per pound)24201612m010402030CHEESE (Pounds per week)Is Megan currently maximizing her utility?5060?MU OF FRUIT (Utils per pound)24201612840010402030FRUIT (Pounds per week)50Yes; the marginal utility she receives from her last pound of cheese equals that of her last pound of fruit.No; she likes fruit and cheese more than other goods, so she should buy more of both.No; she could buy less fruit and more cheese, not spend any more money, and be better off.60(?)

Answered: For each of the following combinations…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter21: Demand: Consumer Choic

Section: Chapter Questions

Problem 1E

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Question

For each of the following combinations of cheese and fruit, calculate the marginal utility per dollar from the last pound of cheese and the last pound of
fruit. Then, use the dropdown menus in the last column to indicate which of the combinations satisfy the condition for consumer equilibrium.
Combination
A
B
с
D
Cheese
(Pounds per Week)
20
40
30
50
MUC
Pa
Fruit
(Pounds per Week)
30
20
30
40
MUF
P
Consumer Equilibrium?
PPPP
Suppose Megan has an "appetizer budget" of $165 per week, which she spends on cheese and fruit. To maximize her utility, Megan will purchase
pounds of cheese and
pounds of fruit per week.

Megan enjoys consuming both cheese and fruit. Each pound of cheese costs Pc = $1, and each pound of fruit costs Pp = $2. Suppose that Megan
buys 30 pounds of cheese and 20 pounds of fruit per week. The following graphs show her marginal utility curves for cheese and fruit. At her current
consumption level, Megan's marginal utility from consuming the last pound of cheese she bought is MUC = 12 utils per pound, and her marginal
utility from consuming the last pound of fruit she bought is MUR = 12 utils per pound.
MU OF CHEESE (Utils per pound)
24
20
16
12
m
0
10
40
20
30
CHEESE (Pounds per week)
Is Megan currently maximizing her utility?
50
60
?
MU OF FRUIT (Utils per pound)
24
20
16
12
8
4
0
0
10
40
20
30
FRUIT (Pounds per week)
50
Yes; the marginal utility she receives from her last pound of cheese equals that of her last pound of fruit.
No; she likes fruit and cheese more than other goods, so she should buy more of both.
No; she could buy less fruit and more cheese, not spend any more money, and be better off.
60
(?)

Expert Solution

Step 1: Introduction

Utility refers to the total satisfaction that is obtained by the consumer from consuming the units of a given good or service. Consumer satisfaction is maximized when the marginal utility received from the last pound of one product is equal to the marginal utility received from the last pound of another product.

The bundle/the combination of goods at which the consumer's total utility is maximum is known as the optimal consumption bundle. The optimal consumption bundle is achieved when the marginal utility per dollar spent on each good is equalized across all the goods consumed by the consumer.

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