Answer these two simple questions please Bruno, the consumer in Problem 3, is be

Question

Answer these two simple questions please Bruno, the consumer in Problem 3, is best friends with Bernie, who shares his love for notebooks and Beyonce MP3s. The accompanying table shows Bernie's utilities from notebooks and Beyoce MP3s. The price of a notebook is $4, the price of an MP3 is $2, and Bernie has $20 of income to spend. Which consumption bundles of notebooks and MP3s can Bernie consume if he spends all his income? Illustrate Bernie's budget line with a diagram, putting MP3s on the horizontal axis and notebooks on the vertical axis. Calculate the marginal utility of each notebook and the marginal utility of each MP3. Then calculate the marginal utility per dollar spent on notebooks and the marginal utility per dollar spent on MP3s.

Explanation / Answer

Bernie can consume the consumption bundle of 3 notebooks and 4 MP3 players which gives a maximum utility of 136.

Notebooks Total Utility Marginal Utility MU per $ MP3s Total Utility Marginal Utility MU per $ 0 0 0 0 1 32 32 8 2 28 28 3.5 2 60 28 7 4 52 24 3 3 84 24 6 6 72 20 2.5 4 104 20 5 8 96 24 3 5 120 16 4 10 108 12 1.5

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