(Solved): Bruno, the consumer in Problem 1, is best friends with Ruby who shares Bruno's love for energy bars ...

Bruno, the consumer in Problem 1, is best friends with Ruby who shares Bruno's love for energy bars and smoothies. The accompanying table shows Ruby's utilities from smoothies and energy bars. \table[[Quantity of smoothies,Utility from smoothies (utils),Quantity of energy bars,Utility from energy bars (utils)],[0,0,0,0],[1,32,2,28],[2,60,4,52],[3,84,6,72],[4,104,8,88],[5,120,10,100]] The price of an energy bar is

, the price of a smoothie is

, and Ruby has

of income to spend. a. Which consumption bundles of energy bars and smoothies can Ruby consume if she spends all her income? Illustrate Ruby's budget line with a diagram, putting smoothies on the horizontal axis and energy bars on the vertical axis. b. Calculate the marginal utility of each energy bar and the marginal utility of each smoothie. Then calculate the marginal utility per dollar spent on energy bars and the marginal utility per dollar spent on smoothies. c. Draw a diagram like Figure

in which both the marginal utility per dollar spent on energy bars and the marginal utility per dollar spent on smoothies are illustrated. Draw the quantity of energy bars increasing from left to right, and the quantity of smoothies increasing from right to left. Using this diagram and the utility-maximizing principle of marginal analysis, predict which bundle - from all the bundles on her budget line - Ruby will choose.