A decision maker wishes to maximize the total benefit associated with three
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A decision maker wishes to maximize the total benefit associated with three

A decision maker wishes to maximize the total benefit associated with three activities, X, Y, and Z. The price per unit of activities X, Y, and Z is $1, $2, and $3, respectively. The following table gives the ratio of the marginal benefit to the price of the activities for various levels of each activity:

a. If the decision maker chooses to use one unit of X, one unit of Y, and one unit of Z, the total benefit that results is $.

b. For the fourth unit of activity Y, each dollar spent increases total benefit by $. The fourth unit of activity Y increases total benefit by $.

c. Suppose the decision maker can spend a total of only $18 on the three activities.

What is the optimal level of X, Y, and Z? Why is this combination optimal? Why is the combination 2X, 2Y, and 4Z not optimal?

d. Now suppose the decision maker has $33 to spend on the three activities. What is the optimal level of X, Y, and Z? If the decision maker has $35 to spend, what is the optimal combination? Explain.

Hint
Accounts & FinanceThe net gain is either total sales minus total opportunity expense, or economic advantage. Economists hold that in order to optimize net profit, investors and businesses measure each operation at the margin—that is, they weigh both the added gain and the increased expense of another element of the operation. Labor and supplies are typically included in the measure, as well as...

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