2b. Marginal Utility: After 1st: 100 After 2nd: 85 After 3rd: 60 After 4th: 40 After 5th: 30 After 6th: 20 After 7th: 10 After 8th: 5
2d. This is reasonable because marginal utility is the additional satisfaction resulting from consuming one more unit of a certain product. Brett likes avocados, and each avocado will increase his total utility. However after some point each successive avocado adds less to his total utility compared to the previous one.
3A. Utility maximization requires that the marginal utility per dollar spent on each good should be equated for both goods. If this equality does not hold then the pattern of expenditure can be changed in a way as to increase total utility. Consume less of X and more of Y (more you consume the smaller the marginal utility).
3B. Consume less of X and more of Y.
3C. Do not change the pattern of consumption.
3D. Do not change the pattern of consumption.
3E. Consume less of X and more of Y.
4a. The sum of Rupert’s willingness to pay for the first five pizzas is $18 + $16 + $13 + $9 + $4 = $60.00. Therefore Rupert would be willing to pay $60 per week for these five pizzas - this is the total value that Rupert places on five weekly pizzas.
4b. Rupert will purchase pizzas until his willingness to pay for the next pizza is less than the market price (as listed in the table). At a price of $10 per pizza, Rupert will buy three pizzas per week. This is because by the fourth pizza he is only willing to pay $9 - below the selling price.
4c. The total value that Rupert places on the first three pizzas is $18 + $16 + $13 = $47. The amount Rupert must spend to buy them at a market price of $10 per pizza for three pizzas is $30. Therefore his consumer surplus is $17.
5a. Sally is maximizing her total utility on each shopping trip. This is because a
