1. Newspaper vending machines are designed so that once you have paid for one pa

Question

1. Newspaper vending machines are designed so that once you have paid for one paper; you have access to all the papers in the machine and could take multiple papers at a time. However, other vending machines dispense only one item (the item you bought). You do not have access to all the goods (sodas, candy, snacks, etc.) at one time. Using the concept of marginal utility, explain why these vending machines differ? 2. Amy is shopping at a dollar store. She is currently buying 5 bracelets that cost $1 each and 4 sodas that cost $1 each. The table below indicates the marginal utility she obtains when she purchases this combination. Quantity Marginal Utility Bracelets 5 30 Sodas 4 40 a. Is this consumer maximizing his/her utility? b. If not, should she consume more bracelets or more sodas? Explain. c. Answer the following assuming that one more bracelet is purchased and one less soda is consumed: 1. What happens to the Marginal Utility of bracelets and the Marginal Utility of soda? 2. What happens to the Total Utility received? 3. What happens to the total dollars spent?

Explanation / Answer

Hi, If you like my answer, please rate my answer first and according to my answer...that way only I can earn points. Thanks Based on marginal utility, it is expected that after taking one paper, you are expected not to read the next paper with same need. So by combining such package, you can get more from customers, by spending less. No, this customer is not maximizing since utility of 4th soda is> 5th bracelet. So she should buy more sodas than bracelets. 1) Marginal utility of bracelet is further reduced while that of soda increases. 2) Total utility received is not maximum 3) Total dollars spent remain constant.

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