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4. Finding the optimal combination of two goods Larry enjoys consuming both milk and juice. Each glass of milk costs PM = $1, and each
4. Finding the optimal combination of two goods Larry enjoys consuming both milk and juice. Each glass of milk costs PM = $1, and each glass of juice costs Py = $2. Suppose that Larry buys 30 glasses of milk and 20 glasses of juice per week. The following graphs show his marginal utility curves for milk and juice. At his current consumption level, Larry's marginal utility from consuming the last glass of milk he bought is MUM = 12 utils per glass, and his marginal utility from consuming the last glass of juice he bought is MU, = 12 utils per glass. (? ? 24 24 20 20 16 Slope: -0.20 N MU OF MILK (Utils per glass) 12 Y-Intercept: 16.00 MU OF JUICE (Utils per glass) Co A 10 20 30 40 50 10 20 30 40 50 60 MILK (Glasses) JUICE (Glasses) Is Larry currently maximizing his utility? No; he could buy more milk and less juice, not spend any more money, and be better off. Yes; the marginal utility he receives from his last glass of milk equals that of his last glass of juice. O No; he could buy less milk and more juice, not spend any more money, and be better off. O No; he likes juice and milk more than other goods, so he should buy more of both. For each of the following combinations of milk and juice, calculate the marginal utility per dollar from the last glass of milk and the last glass of juice. Then, use the dropdown menus in the last column to indicate which of the combinations satisfy the condition for consumer equilibrium. Milk Juice Combination (Glasses) MUM MU PM (Glasses) P , Consumer Equilibrium? A 20 16 30 40 8 20 30 12 30 O 50 40 Suppose Larry has a beverage budget of $130 per week, which he spends on milk and juice. To maximize his utility, Larry will purchase glasses of milk and glasses of juice per week
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