Question

From the data in Problem 20-3, if the price of a cheeseburger is $\backslash (2$, the price of a bag of french fries is $\backslash )1$, and you have $\$1$ to spend (and you spend all of it), what is the utility-maximizing combination of cheeseburgers and french fries?

Short answer

The combination that maximizes the benefits of cheeseburgers and french fries is two cheeseburgers and two french fries.

Step-by-step solution

Step 1- Introduction

Belowis a graph of the marginal and total utility of cheeseburger fries.

In this table, we've added two columns of marginal utility per dollar for cheeseburgers and french fries. The first cheeseburger has a marginal utility of $20(20/1=20)$per dollar, while the m$(10/1=10)$orginal utility per dollar after eating the first fried food is Cheeseburgers have a high marginal utility, so buy a cheeseburger. This leaves you with $\$5(6-1=5)$in income.

Step 2- Explanation

Reconsuming the second cheeseburger and french fries will give you the same marginal utility, 8 utility, per dollar.

If the consumer buys two cheeseburgers and two french fries, the total income will be evenly distributed. $\$6(4+2=6)$.