Javier Enjoys Eating Cookies and Drinking Milk,but He Experiences Diminishing

question 134

Essay

Javier enjoys eating cookies and drinking milk,but he experiences diminishing marginal utility when consuming both of them.The following table represents the marginal utility he gets from the first 5 units of each item.Cookies cost 50 cents each,whereas glasses of milk cost $1 each.

a.If Javier has only $2.00,which combination of milk and cookies maximizes his utility?
b.If Javier's spending ability increases to $3.50,what combination of milk and cookies maximizes his utility?
c.If Javier does not have a budget constraint,what combination of milk and cookies maximizes his utility?

---

Definitions:

Salaries Payable

A liability account representing the amounts owed to employees for work performed but not yet paid.

Net Income

The amount of money left after all expenses have been deducted from total revenues.

Prepaid Expense

Expenses paid in advance by a company for goods or services to be used at a future date, recorded as an asset.

Inventory

The total amount of goods and materials held by a business for the purpose of resale or production.