Question #26404

1. Sam maximizes his utility by spending his entire income of $16 on bats and lizards.
Table below has Sam’s marginal utility from each good. The price of a bat is $2, and he
buys 2 bats. The marginal utility from the last lizard he buys is 36.
Quantity: Bats: Lizards:
MU: and TU: MU: and TU:
1 20 ? 50 ?
2 18 ? 44 ?
3 14 ? 38 ?
4 8 ? 26 ?
a. Fill in total utility for each good.
b. Calculate the price of a lizard. (Hint: use the concept of marginal utility per dollar)
c. What is Sam’s total utility if he maximizes his utility by spending his income of $16?
d. Sam could buy 4 lizards. If he did so and also purchased the maximum number of
bats possible given his income, what would be his total utility then?

Expert's answer

1. Sam maximizes his utility by spending his entire income of $16 on bats and lizards.Table below has Sam’s marginal utility

from each good. The price of a bat is $2, and he buys 2 bats. The

marginal utility from the last lizard he buys is 36.

Quantity: MU: and TU (Bats) MU: and TU (Lizards)

1 20

20 50

50

2 18

38 44

94

3 14

52 36

130

4 8

60 26

156

a. Fill in total utility for each good.

b. Calculate the price of a lizard. (Hint: use the concept of

marginal utility per dollar)

Concept of marginal utility per dollar: MUa/Pa = MUb/Pb

For2 Bats MU/P = 18/2$ = 9

MUbats/Pbats= MUlizards/Plizards

MUlizards/Plizards= 9

2*2$+ Plizards*Q = 16

Plizards*Q= 12

MUlizards/Plizards= 9

P= 4, Q = 3, MU = 36

c. Whatis Sam’s total utility if he maximizes his utility by spending his income

of $16?

TUtotal= 38 + 130 = 168

d. Sam could buy 4 lizards. If he did so and also purchased the

maximum number of bats possible given his income, what would be his

total utility then?

TUtotal= TU of 2 bats + TU of 4 lizards = 38 + 130 = 168

from each good. The price of a bat is $2, and he buys 2 bats. The

marginal utility from the last lizard he buys is 36.

Quantity: MU: and TU (Bats) MU: and TU (Lizards)

1 20

20 50

50

2 18

38 44

94

3 14

52 36

130

4 8

60 26

156

a. Fill in total utility for each good.

b. Calculate the price of a lizard. (Hint: use the concept of

marginal utility per dollar)

Concept of marginal utility per dollar: MUa/Pa = MUb/Pb

For2 Bats MU/P = 18/2$ = 9

MUbats/Pbats= MUlizards/Plizards

MUlizards/Plizards= 9

2*2$+ Plizards*Q = 16

Plizards*Q= 12

MUlizards/Plizards= 9

P= 4, Q = 3, MU = 36

c. Whatis Sam’s total utility if he maximizes his utility by spending his income

of $16?

TUtotal= 38 + 130 = 168

d. Sam could buy 4 lizards. If he did so and also purchased the

maximum number of bats possible given his income, what would be his

total utility then?

TUtotal= TU of 2 bats + TU of 4 lizards = 38 + 130 = 168

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