Refer to Table 10-3. The table above shows Lee\'s marginal utility per dollar fr
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Question
Refer to Table 10-3. The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda. The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1. Use this information to select the correct statement.
a. We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity.
b. To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda.
c. If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda.
d. We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his income is.
Table 10-3 Ice Cream Cones Lime Fizz Soda MU 30 25 20 15 10 MU 40 35 26 18 15 QuantityExplanation / Answer
Solution: We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his income is.
Explanation: By adding up the marginal utilities for ice cream cones and Lime Fizz Soda, we can know the number of ice cream cones and cans of Lime Fizz Soda Lee have to consume for the maximization of the utility. But we cannot compute how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing the amount of income.
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