Homework 3

ECON201 Spring 2022

Problem 1
Fill in the following table on the total and marginal utilities of a certain product A. Use your
results to answer the following questions.
Units of Total Marginal
product A utility utility

0 0

1 20 _20____

2 35 __15___

3 __45___ 10

4 __50___ 5

5 __50___ 0

6 45 __-5___

7 35 __-10___

8 __20___ –15

Identify the point where utility is maximized on both curves. Discuss the reasoning
behind each value.
In total utility, the maximum utility is when units produced are 4 and 5 ( tu=equal 50), In
marginal utility, the maximum utility is in unit 1 ( mu=20)
Problem 2
Columns 1 through 3 in the table below show the marginal utility which a particular consumer
would get by purchasing various quantities of products A, B, and C.
(1) (2) (3)
Unit of Margina Margina Margina
produc l utility, l utility, l utility,
t A B C

First 18 39 12

Second 16 36 10

Third 14 33 9

Fourth 12 30 8

Fifth 10 27 7

Sixth 8 24 5

Sevent 3
h 6 21

If the prices of A, B, and C are $2, $3, and $1, respectively, and the consumer has $26 to
spend on these three products, what combination of the three products should be purchased in
order to maximize utility?
(MUx/Px=MUy/Py=MUz/Pz) 2 units of A, 6 units of B, and 4 units of C, shown by the fact that:
16/$2 = 24/$3 = 8/$1. The $26 in income is spent.