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Exercise 3 This exercise is designed to help reinforce the student's understanding of the topic of consumer choice based on marginal utility. This exercise can
Exercise 3 This exercise is designed to help reinforce the student's understanding of the topic of consumer choice based on marginal utility. This exercise can be used in conjunction with any economics textbook that addresses this topic. NOTE: As you are working through this exercise make sure that you total all parts of your diagrams to ayoid mistakes. Do not use pen! Ralph is faced with haying to make a decision of choosing between mini pizzas and smoothies. They are priced at Sl for mini pizzas and SLDD for smoothies. The marginal utility dened from each of the two good is outlined in Table 1 and Table 2. Ralph's lunch budget for each week is $11.00. If Ralph had no budget constraints, what would be the maximum marginal utility he could receiye by consuming both products? How much would that cost him? Ralph however as you know does have a budget. With that in mind' what is the best way for him to spend his budget and get the best bang for the buck of mini pizzas and smoothie purchases? Use the following formula to determine how Ralph should spend his money. MEWPMED = MUsr'Ps NOTE: Remember economic decisions are made at the marginal leyel. Marginal Utility Quantity of from the last Mini Pizza's [MFI Mini Pizza [M P] consumedfweek 2D 15 14 ID Table 1 Marginal Utility Quantity of from the last Smoothies Smoothie consumedfweek Table 2 MUwaw
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