Tony Has $64 to Spend on Jeans and T-Shirts

question 116

Essay

Tony has $64 to spend on jeans and T-shirts. Use the following table to find the combination of jeans and T-shirts that will maximize Tony's utility.
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$\begin{array}{l}\hline \quad {\text { T-Shirts (\$6) }} \quad \quad \quad {\text { Jeans (\$20) }} \\\begin{array}{|c|c|c|c|}\hline \text { Quantity } & M U & \text { Quantity } & \text { MU } \\\hline 0 & - & 0 & - \\\hline 1 & 45 & 1 & 120 \\\hline 2 & 39 & 2 & 67 \\\hline 3 & 36 & 3 & 55 \\\hline 4 & 27 & 4 & 27 \\\hline 5 & 15 & 5 & 19 \\\hline 6 & 6 & 6 & 6 \\\hline 7 & 3 & 7 & \\\hline\end{array}\end{array}$

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Definitions:

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be either positive or negative.

Market Prices

The current price at which a good or service can be bought or sold in a market.

Efficient Level

The efficient level refers to a state of resource allocation where it is impossible to improve the situation of one party without worsening the situation of another, often associated with maximizing output without wasting resources.

Output

The total amount of goods or services produced by a firm or country.