Question

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.

Answer 1

Jane is not maximizing her utility because she should spend her remaining $2 on chicken sandwiches to maximize her satisfaction.

Step-by-step explanation:

To determine if Jane is maximizing her utility, we need to compare the marginal utility per dollar for chicken sandwiches and fries. Marginal utility per dollar is calculated by dividing the additional utility obtained from consuming one more unit of a product by the price of that product.

For chicken sandwiches, the marginal utility per dollar is 15 mu/$. For fries, the marginal utility per dollar is 3 mu/$. Based on this information, Jane should allocate her remaining budget to purchase chicken sandwiches rather than fries, as they provide a higher marginal utility per dollar.

Therefore, Jane is not maximizing her utility because she should spend her remaining $2 on chicken sandwiches to maximize her satisfaction.