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Answer to Question #26404 in Microeconomics for abbas

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

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