Mathematics, 21.02.2020 20:40, austinmiller3030

Assume that strawberries cost $1 and apples cost $2. Which of the following combinations of strawberries and apples satisfies the optimal consumption rule? a. 2 strawberries and 4 apples. b. 6 strawberries and 5 apples. c. 5 strawberries and 5 apples. d. 3 strawberries and 2 apples. e. 6 strawberries and 7 apples.

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answered: byrdfarm

Option C. 5 strawberries and 5 apples

Step-by-step explanation:

The given question is incomplete ; complete question attached herewith.

Cost of strawberries and apples = $1 and $2

Marginal utility for strawberries

Strawberry consumed Total utility Marginal utility

0 0 0

1 7 (7 - 0) ÷ 1 = 7

2 13 (13 - 7) ÷ 1 = 6

3 18 (18 - 13) ÷ 1 = 5

4 22 ( 22 - 18) ÷ 1 = 4

5 25 (25 - 22) ÷ 1 = 3

6 27 (27 - 25) ÷ 1 = 2

7 28 (28 - 27) ÷ 1 = 1

For apples,

Apples consumed Total utility Marginal utility

0 0 0

1 14 (14 - 0) ÷ 1 = 14

2 26 (26 - 14) ÷ 1 = 12

3 36 (36 - 26) ÷ 1 = 10

4 44 (44 - 36) ÷ 1 = 12

5 50 (50 - 44) ÷ 1 = 6

6 54 (54 - 50) ÷ 1 = 4

7 56 (56 - 54) ÷ 1 = 2

Now from the formula,

$\frac{\text{Marginal utility of strawberry}}{\text{Price of strawberry}}=\frac{\text{Marginal utility of apples}}{\text{Price of apples}}$

From the table we find at strawberry consumed = 5 , and apples consumed = 5

The ratio of marginal utility and price are same.

$\frac{\text{Marginal utility of strawberry}}{\text{Price of strawberry}}=\frac{3}{1}=3$

$\frac{\text{Marginal utility of apples}}{\text{Price of apples}}=\frac{6}{2}=3$

Therefore, Option C. 5 strawberry and 5 apples will be the answer.

Assume that strawberries cost $1 and apples cost $2. Which of the following combinations of strawber

answered: Guest

Is this from a

answered: Guest

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Assume that strawberries cost $1 and apples cost $2. Which of the following combinations of strawber...