The following table shows Lee’s utility from consuming ice cream cones and cans of Lime Fizz soda:
a. Ed inspects this table and concludes, “Lee’s optimal
choice would be to consume 4 ice cream cones and
5 cans of Lime Fizz because with that combination, his
marginal utility from ice cream cones is equal to his
marginal utility from Lime Fizz.” Do you agree with Ed’s
reasoning? Briefly explain.
b. Suppose that Lee has an unlimited budget to spend on
ice cream cones and cans of Lime Fizz. Under these circumstances,
how many ice cream cones and how many
cans of Lime Fizz will he consume? (Assume that Lee
cannot consume more than 6 ice cream cones or 6 cans
of Lime Fizz.)
c. Suppose that Lee has $7 per week to spend on ice cream
cones and cans of Lime Fizz. The price of an ice cream
cone is $2, and the price of a can of Lime Fizz is $1.
If Lee wants to maximize his utility, how many ice
cream cones and how many cans of Lime Fizz should
he buy?