Question

Todd is a cattle rancher. In June and July he spent his clothing budget on jeans and cowboy hats. Each pair of jeans cost $50 and each hat cost $100. At Todd’s optimal choice, his marginal utility from the last pair of jeans purchased is 200. This means that his marginal utility from the last cowboy hat purchased is: 550 500 450 400 NEXT

Answer 1

The marginal utility of the last cowboy hat purchased by Todd is 400. This is determined by ensuring the marginal utility per dollar is equal for both jeans and cowboy hats, with jeans providing a marginal utility of 200 and costing $50 each.

Step-by-step explanation:

To determine Todd's marginal utility from the last cowboy hat purchased, we need to apply the concept of marginal utility per dollar. The marginal utility per dollar is the amount of additional utility received from spending one more dollar on a good. It is calculated by dividing the marginal utility of an item by its price. Todd's optimal choice would be where the marginal utility per dollar is equal for both jeans and cowboy hats.

Since each pair of jeans costs $50 and provided a marginal utility of 200, we can calculate the marginal utility per dollar as follows:

• Marginal utility per dollar for jeans = Marginal utility of jeans / Price of jeans = 200 / $50 = 4

Given this, we can set up the equation for cowboy hats to find their marginal utility, knowing that the cost of a cowboy hat is $100:

• Marginal utility per dollar for hats = Marginal utility of hats / Price of cowboy hats
• 4 = Marginal utility of hats / $100
• Marginal utility of hats = 4 * $100
• Marginal utility of hats = $400

Therefore, Todd's marginal utility from the last cowboy hat purchased is 400.

Answer 2

The correct answer to the following question is option D) 400.

Explanation

Marginal utility can be described as the additional utility that a person gets by consuming one additional unit of product. From the given above question , we know that for Todd each pair of jeans cost $50 and the marginal utility that he gets from the last pair of jeans is 200, so if we know that each cowboy hat cost $100, then the marginal utility from the last cowboy hat would be 100 x 4 = 400 .