Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Teachers at the local school have contacted the company We R' Write with a complaint. Teachers noticed that when We R' Write sold individual pencils,

Teachers at the local school have contacted the company We R' Write with a complaint. Teachers noticed that when We R' Write sold individual pencils, students made sure to take care of the pencils. However, when the company started selling larger packages of pencils, students started needlessly breaking their pencils, using them for purposes other than doing school work, or even just throwing them away.

You have been provided with information regarding the quantity and total utility gained from students purchasing different numbers of pencils that is presented in Table 1 below. Table 2 provides information concerning pens, which will be used to answer the question in the third bullet below.

  • Explain the law of diminishing marginal utility from the standpoint of economic theory as it applies to the situation described in the scenario.
  • Explain what specifically We R' Write should understand about marginal utility as the quantity consumed increases that would explain why students become more reckless with their pencils when they purchase more. Make sure to use economic concepts in your answer. Also, use the table below as a guide to help you explain this behavior to We R' Write so they can relate the information to the teachers.
  • Using the table below and economic theory, what combination of pencils and pens would maximize utility? Briefly explain how you determined this point.

Table 1. Utility Associated With Consuming Pencils

Quantity of

Pencils

Consumed

Total

Utility

Marginal

Utility

Individual

Pencil

Price

Marginal Utility

per Dollar for

Pencils

0

0

---

---

---

10

50

5

$0.25

$1.25

20

93

4.3

$0.25

$1.08

30

127

3.4

$0.25

$0.85

40

151

2.4

$0.25

$0.60

50

165

1.4

$0.25

$0.35

60

173

0.8

$0.25

$0.20

70

180

0.7

$0.25

$0.18

Table 2. Utility Associated With Consuming Pens

Quantity of

Pens

Consumed

Total

Utility

Marginal

Utility

Individual

Pen

Price

Marginal Utility

per Dollar for

Pens

0

0

---

---

---

2

3.00

1.500

$3.50

$5.25

4

3.45

0.225

$3.50

$0.79

6

3.89

0.220

$3.50

$0.77

8

4.31

0.210

$3.50

$0.73

10

4.65

0.170

$3.50

$0.60

12

4.94

0.145

$3.50

$0.51

14

5.15

0.105

$3.50

$0.37

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

A Course In Environmental Economics

Authors: Daniel J Phaneuf, Till Requate

1st Edition

1316866815, 9781316866818

More Books

Students also viewed these Economics questions

Question

What is a social role? (p. 30)

Answered: 1 week ago