(Figure: Budget Constraint) Refer to the figure. A consumerhas $45 to spend on movie and music downloads per month.What is the price per movie and music download?
A)$15 per movie download and $0.45 per music download
B)$3 per movie download and $1 per music download (True Answer )Correct
C)$2.50 per movie download and $1.50 per music download
D)$10 per movie download and $0.80 per music download

Question

(Figure: Budget Constraint) Refer to the figure. A consumerhas $45 to spend on movie and music downloads per month.What is the price per movie and music download?
A)$15 per movie download and $0.45 per music download 
B)$3 per movie download and $1 per music download (True Answer )Correct 
C)$2.50 per movie download and $1.50 per music download 
D)$10 per movie download and $0.80 per music download

Quizplus · Accepted Answer

The best choice for this consumer would be to download 3 movies and 15 music songs per month, which would exhaust their entire budget. At this combination of purchases, the consumer would be at a point on their budget constraint that is tangent to their indifference curve, representing the highest level of utility they can achieve given their budget. This point is shown in the graph as point E. The price per movie download would be $3 (calculated as $9 spent on movies divided by 3 movie downloads), and the price per music download would be $1 (calculated as $15 spent on music divided by 15 music downloads).

(Figure: Budget Constraint) Refer to the Figure