The total benefit derived from a product equals: the sum of the marginal benefits of all units of the product that are consumed the sum of the marginal benefits of all units of the product that are consumed minus total consumer expenditure on the product the marginal utility derived from the consumption of a product the maximum price a consumer will pay for a specific unit of a product the minimum price a consumer will pay for a specific unit of a product
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It is also not the maximum or minimum price a consumer will pay for a specific unit of a product. These prices can be influenced by a variety of factors, including the consumer's income, preferences, and the availability of substitutes, and do not necessarily Show more…
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Marginal Utility Goods 1 and 2 are available at dollar prices of $p_{1}$ per unit of Good 1 and $p_{2}$ per unit of Good $2 .$ A utility function $U\left(x_{1}, x_{2}\right)$ is a function representing the utility or benefit of consuming $x_{j}$ units of good $j .$ The marginal utility of the $j$ th good is $\partial U / \partial x_{j}$ the rate of increase in utility per unit increase in the jth good. Prove the following law of economics: Given a budget of $L$ dollars, utility is maximized at the consumption level $(a, b)$ where the ratio of marginal utility is equal to the ratio of prices: $$\frac{\text { Marginal utility of Good } 1}{\text { Marginal utility of Good } 2}=\frac{U_{x_{1}}(a, b)}{U_{x_{2}}(a, b)}=\frac{p_{1}}{p_{2}}$$
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Complete the following table and answer the questions below: $$\begin{array}{ccc} \begin{array}{c} \text { Units } \\ \text { Consumed } \end{array} & \text { Total Utility } & \text { Marginal Utility } \\ \hline 0 & 0 & \\ 1 & 10 & 10 \\ 2 & - & 8 \\ 3 & 25 & - \\ 4 & 30 & - \\ 5 & - & 3 \\ 6 & 34 & - \end{array}$$ a. At which rate is total utility increasing: a constant rate, a decreasing rate, or an increasing rate? How do you know? b. "A rational consumer will purchase only 1 unit of the product represented by these data since that amount maximizes marginal utility." Do you agree? Explain why or why not. c. "It is possible that a rational consumer will not purchase any units of the product represented by these data." Do vou agree? Explain why or why not.
'Question 4 The following presents the costs and revenues for a firm. Quantity Total Cost S8 Marginal Cost Total Revenue So Marginal Revenue Profit 10 11 13 20 28 37 16 34 40 48 56 Calculate the marginal cost, marginal revenue and profit for each unit of production ii_ How many units should the firm produce to maximise profit? b. Describe the relationship between the marginal product and the total product of a firm'
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