# Newspaper vending machines are designed so that once you have paid (answer attached) Unique 5 - 14400

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1. Newspaper vending machines are designed so that once you have paid for one paper; you have access to all the papers in the machine and could take multiple papers at a time. However, other vending machines dispense only one item (the item you bought).  You do not have access to all the goods (sodas, candy, snacks, etc.) at one time.  Using the concept of marginal utility, explain why these vending machines differ?

2. Amy is shopping at a dollar store.  She is currently buying 5 bracelets that cost \$1 each and 4 sodas that cost \$1 each.  The table below indicates the marginal utility she obtains when she purchases this combination.

 Quantity Marginal Utility Bracelets 5 30 Sodas 4 40

1. Is this consumer maximizing his/her utility?

1. If not, should she consume more bracelets or more sodas?  Explain.

1. Answer the following assuming that one more bracelet is purchased and one less soda is consumed:

1.    What happens to the Marginal Utility of bracelets and the Marginal Utility of soda?

2.    What happens to the Total Utility received?

3.    What happens to the total dollars spent?

Solution Description

To answer (a) remember the two rules associated with utility maximization, first that the entire budget (or income) must be spent, and that the marginal utility per dollar spent (MU/\$) for each g

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