. Suppose a particular consumer has 8 birr to be spent on two goods, A and B. The unit price of good A is 2 birr and the unit price of B is 1 birr. The marginal utility (MU) she gets from consumption of the goods is given below.

Quantity

 

MUA

MUB

1

36

30

2

24

22

3

20

16

4

18

12

5

16

10

6

10

4

1. A) Based on the cardinal analysis, what is the combination of the two goods that gives maximum utility to the consumer?
2. B) What is the total utility at the utility maximization level?
3. Suppose the production function is given by Q(L, K) = L 4 K 4 . Assuming capital is fixed,

find APL and MPL.

1. Consider the following short run production function:

Q=6L2 -0.4L3

1. a)  Find the value of L that maximizes output
2. b)  Find the value of L that maximizes marginal product
3. c)  Find the value of L that maximizes average product

The utility function of a consumer who consumes two products (X1, X2) is:

u(x1,x2)= x1x2 + 2x1

The consumer’s budget constraint is

4x1+2x2=60

You are required to:

a) Find the expression for marginal utility from consuming each of the two products.

b) Write the expression for the slope of the indifference curve (i.e., marginal rate of substitutions, which is the ratio of the two marginal utilities.

c) Find the quantities of the two products that maximizes the consumer’s utility.

3. 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.

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?