Question

3. What will be the maximum utility of a person given the following utility function?

U= -4Q2+80Q

Answer 1

The maximum utility of a person is reached when marginal utility $MU = U'(Q) = 0$ , so:

$MU = -8Q + 80 = 0,$

8Q = 80,

Q = 10 units.

The maximum utility is:

$U = -4×10^2+80×10 = 400$ units.