Sharp rises in the cost of milk, grain, and fresh fruits and vegetables are hitting cafeterias across the country, forcing cash-strapped schools to raise prices or serve more economical dishes. For example, Fairfax schools serve oranges—14¢ each—instead of grapes, which are 25¢ a serving.
Assume that a Fairfax school has a $14 daily fruit budget.
a. How many oranges a day can the school afford to serve if it serves no grapes? How many servings of grapes can the school afford each day if it serves no oranges?
b. If the school provides 50 oranges a day and maximizes utility, how many servings of grapes does it provide? If the marginal utility from an orange is 14 units, what is the marginal utility from a serving of grapes?