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final review

# final review - Final Exam Review Additional Problem#4...

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Final Exam Review Additional Problem #4 : Utility Analysis 1. Max enjoys windsurfing (W) and snorkeling. He obtains the following total utility from each of these sports: Half-hours (per month) TU W MU TU S MU S 1 60 20 2 110 38 3 150 53 4 180 64 5 200 70 6 206 75 7 211 79 8 215 82 9 218 84 (a) Calculate Max’s marginal utility from windsurfing and from snorkeling. (You may add this information to the above table with columns for the MU for windsurfing and the MU for snorkeling. (b) If Max has \$35 to spend, and equipment for windsurfing rents for \$10 per half-hour, while snorkeling equipment rents for \$5 per half-hour, how long will Max choose to windsurf? Snorkeling? Why? (c) What is Max’s budget constraint? Explain verbally and write the equation for his budget constraint below. (d) Now, suppose Max’s sister gives him \$20 to send on his leisure pursuits, so he now has \$55 to spend. How long will Max windsurf? Snorkeling? (e) If Max has \$55 to spend and the rent on windsurfing equipment is cut to \$5 per half-hour, how will Max now spend his time windsurfing? Snorkeling?

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