1 Sams total utility for bananas is in the table above Sams

1. Sam\'s total utility for bananas is in the table above. Sam\'s marginal utility from the fourth banana is

100

25

20

15

cannot be determined from the given information.

2. Suppose a public good is provided in an economy with only two consumers, Popeye and Captain Hook. If Popeye values the public good at $4,000 per year, and Captain Hook values it at $3,000 per year, the economy\'s marginal benefit of the public good per year is

$7,000.

$4,000.

$3,000.

$1,000.

$12,000.

Solution

ANSWER:

1) Sam\' s marginal utility from the 4th banana will be = total utility of the 4th banana - total utility of the 3rd banana = $100 - $80 = $20

hence option c is the right answer.

2) Marginal benefit per year = public good valued by popeye + public good valued by captain hook = $4,000 + $3,000 = $7,000

hence option a is the right answer.