Question

Five consumers have the following marginal utilities of apples and pears: Consumer Marginal Utility of Apples Marginal Utility of Pears Dmitri 8 10 Frances 7 16 Jake 6 12 Latasha 5 9 Nick 4 8 The price of an apple is $1, and the price of a pear is $2. Which, if any, of these consumers are optimizing over their choice of fruit?
a. Dmitri
b. Frances
c. Jake
d. Latasha
e. Nick

Answer 1

Answer:

Options C and E

Only Nick and Jake are optimising over his choice of fruit?

Explanation:

The marginal utility obtained from the purchase of a product is the amount of satisfaction derived from purchasing an additional unit of the product.

The utility is maximised when the satisfaction in terms of marginal utilities obtained from each product is equal to each other.

We obtain this simply by dividing the marginal utilities for each fruit by their price, and comparing them.

Dmitiri:

Apples: 8/1 =8

Pears: 10/2 =5

8/1 is not equals to 10/2

Frances:

Apples: 7/1 =7

Pears: 16/2 =8

7 is not equals to 8

Jake:

Apples: 6/1 =6

Pears: 12/2 =6

The marginal utility is equal hence Jake's choice is optimal

Latasha:

Apples: 5/1 =9

Pears: 9/2 =4.5

9 is not equals to 4.5

Nick:

Apples: 4/1 =4

Pears: 8/2 =4

The marginal utility is equal hence Nick's choice is optimal