Answer the questions following the table.

First-Run Movies Bottles of Wine

Quantity Total

Utility

Marginal

Utility

Quantity Total

Utility

Marginal

Utility

0 0 0 0

1 140 1 180

2 260 2 340

3 360 3 460

4 440 4 510

5 500 5 540

a) Complete the table.

b) Assume that you have $50 a month to devote to entertainment (column labeled First-

Run Movies) and wine with dinner (column labeled Bottles of Wine). What will be

your utility-maximizing combination if the price to see a movie is $10 and a bottle of

wine costs $10 as well?

c) A grape glut in California results in Napa Valley wine dropping in price to $5 a bottle,

and you view this wine as a perfect substitute for what you were drinking earlier. Now

what will be your utility-maximizing combination of movies and wine?

d) Given these data, calculate your elasticity of demand for wine when the price fell from

$10 to $5 (use the midpoint method).