5. Complete the following table (next page) reflecting the total utility from either of two types of
Question:
5. Complete the following table (next page) reflecting the total utility from either of two types of activities (per week): 1) “in-home” entertainment (friends visiting, etc.); and “on the town” entertainment (movies, restaurant meals, and the like). The price of in-home entertainment is $60. The price of a night on the town is $150.
In-Home Event | On-the-Town Event | ||||||
# times/week | Total Utility | Marginal Utility | MU/P | # times/week | Total Utility | Marginal Utility | MU/P |
0 | 0 | 0 | 0 | ||||
1 | 400 | 1 | 800 | ||||
2 | 780 | 2 | 1500 | ||||
3 | 1100 | 3 | 1900 | ||||
4 | 1380 | 4 | 2200 | ||||
5 | 1500 | 5 | 2400 | ||||
6 | 1600 | 6 | 2500 | ||||
7 | 1650 | 7 | 2550 |
Now, imagine a “poor” graduate student with a weekly income of $330. What is her optimal allocation of spending between these two activities? What is her total utility with this allocation? What would be the graduate student’s allocation if the price of an “On-the-town” event fell to $60? What would be her total utility now? (Work with whole number quantities).
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher