Question

Giving 100 points!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

In a​ year, Tony rents 50 DVDs at ​$6 each and pays ​$50 for​ 10,000 gallons of tap water.

Tony is maximizing total utility.

If Tony's marginal utility from water is 0.4 units per​ gallon, his marginal utility from a DVD rental is ? units.

How many units is tony's marginal utility from a DVD rental?

Answer 1

Cost per DVD is $6 each

Cost per gallon of tap water is $50/10000 = $0.005

In order to maximizing total utility for Tony:

The marginal utility of a DVD rental / cost per DVD

= The marginal utility of a gallon of water / cost per gallon

The marginal utility of a DVD rental

= The marginal utility of a gallon of water * 6 / 0.005

= 480 units per DVD

Answer 2

key is "Tony is maximizing total utility"

4 max total utility,

marginal utility of DVD per $/DVD = marginal utility of water per $/gallon

if his marginal utility from water is 0.4 units per​ gallon, and pays ​$50 for​ 10,000 gallons of tap water,

marginal utility of water per $ = 0.4/(50/10000)=80

80 = marginal utility of DVD/6

marginal utility of DVD = 80*6

= 480 units per DVD