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.

Quantity of Total Individual Marginal Marginal Utility Pencils Pencil Utility Utility per Dollar for Consumed Price Pencils 10 50 5 50.25 $1.25 20 93 4.3 50.25 $1.08 3.0 127 3.4 $0.25 $0.85 40 151 2.4 50.25 50.60 50 165 1.4 50.25 $0.35 60 173 D.B 50.25 50.20 70 180 0.7 50.25 50.18 Table 2. Utility Associated With Consuming Pens Quantity of Individual Marginal Utility Pens Total Marginal Pen per Dollar for Consumed Utility Utility Price Pens D 2 3.00 1.500 53.50 $5.25 4 3.45 0.225 53.50 50.79 6 3.89 0.220 53.50 50.77 B 4.31 0.210 53.50 50.73 10 4.65 0.170 53.50 50.60 12 4.94 0.145 53.50 50.51 14 5.15 0.105 53.50 50.37