Question

Difficulty: MediumConcepts of Utility (Total, Average, and Marginal Utility)

The table below illustrates the utility schedule of a consumer consuming consecutive units of chocolate bars:

Quantity Consumed (QQ)Total Utility (TUTU) in UtilsMarginal Utility (MUMU) in Utils
1115151515
2227271212
33363699
444242MM
55454533

Based on the table, what is the Average Utility (AUAU) of the consumer at 44 units of consumption?

  1. 10.5010.50 utilsAnswer
  2. B
    6.006.00 utils
  3. C
    14.0014.00 utils
  4. D
    8.408.40 utils

Answer

The Average Utility (AUAU) of the consumer at 44 units of consumption is 10.5010.50 utils.
Average Utility (AUAU) measures satisfaction per unit of commodity consumed and is defined mathematically as AU=TUQAU = \frac{TU}{Q}. At 44 units of consumption, the Total Utility (TUTU) is 4242 utils. Dividing 4242 utils by 44 units yields an Average Utility of 10.5010.50 utils.

Step-by-Step Solution

1
Identify Total Utility (TUTU) at the 4th unit of consumption from the schedule.
TU4=42TU_4 = 42 utils.
Average Utility requires total satisfaction divided by the total number of units consumed.
2
Apply the Average Utility formula: AUn=TUnnAU_n = \frac{TU_n}{n}.
AU4=424=10.50AU_4 = \frac{42}{4} = 10.50 utils.
Average utility measures the utility per unit of consumption.

Key Concept

Calculation of Average Utility from a Total Utility Schedule
Estimated Time:1m 0s
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