Question

Harold and Maude both love Russell Stover Maple Creme Chocolate Covered Eggs. The both go into Walgreeen's where the Eggs are priced as follows: 1 egg costs 80 cents; 2 eggs costs $1.60; and 3 eggs costs $2.00. Harold's Marginal Valuation (MV) for the first egg is $2.00; his MV for the second is $1.00; his MV for his third is 70 cents.  Maude's Marginal Valuation (MV) for the first egg is $1.00; her MV for the second is 70 cents; her MV for her third is 20 cents. 

 

 

1. How many Russell Stover Maple Creme Chocolate Covered Eggs does Harold buy? 

Answer 1

Harold will buy 3 eggs. This is because he will still have a marginal value though the value is diminishing. He would stop to purchase an extra egg when the marginal value he will receive by purchasing an extra egg is zero or negative