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Jack and Jill are in the checkout line at Walmart. In Jack’s basket he has 4...

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Economics

Jack and Jill are in the checkout lineat Walmart. In Jack’s basket he has 4 DIGIORNO Original Thin CrustSupreme Frozen Pizza and 2 half-gallons of Blue Bell Chocolate ChipCookie Dough. Jill has in her basket 6 of the DIGIORNO pizzas and 1half-gallon of the Blue Bell ice cream. You know that the pizza areselling for $5.00 each while ice cream costs $4.00 per half-gallon.If both Jack and Jill are utility maximizers, which of thefollowing statements is incorrect.

  1. Jack and Jill have different budgets to spend on pizzas and icecream.
  2. Given what is in his basket, Jack’s marginal utility for pizzasis 1.25 his marginal utility for ice cream.
  3. Jill’s marginal rate of substitution between pizzas and icecream is larger than Jack’s since she has more pizzas than icecream in her basket compared to the ratio in Jack’s basket.
  4. Given what is in her basket, Jill’s marginal utility for icecream is 0.8 her marginal utility for pizzas.
  5. All the above are correct.

Answer & Explanation Solved by verified expert
4.1 Ratings (631 Votes)
Price of pizza 5 Price of icecream 4 Jacks basket has 4 pizza and 2 halfgallon ice cream Jacks budget to spend on pizzas and icecream 5 4 4 2 28 Jills basket has 6 pizzas and 1 halfgallon of icecream Jills budget to    See Answer
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