1) Suppose that Omarâs marginal utility for cups of coffee is constant at 1
.5 utils per cup, no matter how many cups he drinks
. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the third he eats, and so on (that is, declining by 1 util per additional doughnut)
. In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on doughnuts, coffee, or both
. How big would that budget have to be before he would spend a dollar buying a first cup of coffee?