Question

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Posted on Jul 03, 2024

You subconsciously assign scores to what you are considering purchasing, based on the expected level of satisfaction (marginal utility) with that purchase. When making simultaneous

You subconsciously assign "scores" to what you are considering purchasing, based on the expected level of satisfaction (marginal utility) with that purchase. When making simultaneous pairs of purchases, again, you subconsciously compare the amount of satisfaction (marginal utility) that you will receive from the pair of purchases. To decide on the ideal combination of these two purchases, you expect that the last dollar you spend on each of the items will give us the same satisfaction per dollar (marginal utility per dollar). Further, you know that the MORE of an item that you get, the next one you get will give you LESS satisfaction (marginal utility) than the last one gave you (the law of diminishing marginal utility). Using what you have learned about marginal utility and marginal utility per dollar, answer the following questions.

Questions

1. Jane has been working all day, missing both her breakfast and lunch. Finally able to leave work, after being required to work a couple of overtime hours, she is starving. Jane has $20 in her pocket, so she stops at a local

fast food restaurant and orders a grilled chicken sandwich and an order of fries. As she sits down to eat them, a university student approaches her and tells her that she is doing a research project for her microeconomics course and would like to ask Jane a few quick questions. Jane agrees, and the student asks what "score" (marginal utility) from 1 to 100 would she give as her satisfaction level with the first sandwich and the first fries? After eating that order, Jane is still hungry and orders a second chicken sandwich and another order of fries. Again, the student asks Jane to give her new scores. Since Jane has not eaten all day, she is hungry enough to order a third round of food and again gives "scores" to the inquisitive student.

Below is the university student's completed experiment tally sheet of Jane's marginal utility "scores" and the calculation of her marginal utility per dollar, given that each sandwich costs $4.00, and each order of fries costs $2.00. Her budget is $20.

The student filled in the shaded cells based on Jane's responses, then computed the values in the remaining cells. Using this information, answer the following questions.

Student's completed experiment tally sheet. Available budget is $20.

Order of	mu (score) from 1 to 100	Price of each $4.00	Money spent on	Order of	mu (score) from 1 to 100	Price of each $2.00	Money spent on	Total Money Spent	Total Budget Remaining
Chicken Sandwich	mu	mu/$	Chicken Sandwich	Fries	mu	mu/$	Fries
1st	100	25	$4.00	1st	50	25	$2.00	$6.00	$14.00
2nd	72	18	$4.00	2nd	20	10	$2.00	$12.00	$8.00
3rd	60	15	$4.00	3rd	6	3	$2.00	$18.00	$2.00
4th				4th
Utility	232			Utility	76

Total spent on chicken sandwiches: $12

Total spent on fries: $6.00

Total money spent: $18.00

Total budget remaining: $2.00

Marginal utility per dollar for chicken sandwiches of the last item purchased: 15 mu/$

Marginal utility per dollar for fries of the last item purchased: 3 mu/$

Total utility for both: 308

a. Is Jane maximizing her utility? Explain your reasoning and show any calculations

(Enter your response here.

b. If Jane is not maximizing her utility, remembering the law of diminishing marginal utility, would she be better off to buy one less chicken sandwich and one more order of fries? You will need to enter a number for marginal utility, based upon the law of diminishing marginal utility, for an additional order of fries. Be sure to explain your reasoning and show your calculations.