An economist's eight-year-old son gave his parents the following utility tables and then told them that he would like Santa to give him presents that have the maximum possible marginal utility per dollar. Santa has a budget of $60 per child. If action figures cost Santa $10 to produce and squirt guns cost Santa $15 to produce, what presents should Santa deliver this year?
Action Figures
Quantity 1 2 3 4 5 6
Total Utility 60 140 180 200 210 215
MU 60 80 40 20 10 5
MU/$ 6 8 4 2 1 0.5
Squirt Guns
Quantity 1 2 3 4
Total Utility 100 170 210 220
MU 100 70 40 10
MU/$ 6.7 4.7 2.7 0.7(1 point)
Responses
Santa should deliver four squirt guns.
Santa should deliver four squirt guns.
Santa should deliver four action figures and one squirt gun.
Santa should deliver four action figures and one squirt gun.
Santa should deliver six action figures.
Santa should deliver six action figures.
Santa should deliver three action figures and two squirt guns.
Santa should deliver three action figures and two squirt guns.
The marginal utility per dollar for the third action figure is 4, which is higher than the marginal utility per dollar for any quantity of squirt guns. Therefore, Santa should deliver three action figures and two squirt guns to maximize the child's total utility given the budget constraint.