The decision maker wishes to maximize the total benefit associated with three activities X, Y, and Z. The price per unit of activities, X, Y, and Z is $1, $2, and $3 respectively. The following table gives the ratio of the marginal benefit to the price of the activities for various levels of each activity:

a. If the decision maker chooses to use one unit of X, on unit of Y, and one unit of Z, the toatal benefit that results is $____________

b. For the fourth unit of activity Y, each dollar spent increases total benefit by $___________ The fourth unit of activity Y increases total benefit by $____________

c. Suppose the decision maker can spend a total of only $18 on the three activities. What is the optimal level of X, Y, and Z? Why is this combination optimal? Why is the combination 2X, 2Y, and 4Z not optimal?

Transcribed Image Text:

Level of activity 1 2 3 4 5 6 7 8 MBX Px 10 9 87654 MB Py 22 18 12 10 642 t 2 1 MB₂ Pz 14 12 10 a∞642 9 8 t Level of activity 1 2 3 4 5 6 7 8 MBX Px 10 9 87654 MB Py 22 18 12 10 642 t 2 1 MB₂ Pz 14 12 10 a∞642 9 8 t

Answer rating: 100% (QA)

a 10 22 14 46 b 1st bl... View the full answer