A)The optimal consumption bundle contains five movie downloads and 10 music downloads.
B)The MRS is 0.50 at the optimal consumption bundle.
C)The price per music download is half as expensive as the price per movie download.
D)In the optimum consumption bundle, the marginal utility of movie downloads equals half the marginal utility of music Downloads.

Question

A)The optimal consumption bundle contains five movie downloads and 10 music downloads. 
B)The MRS is 0.50 at the optimal consumption bundle. 
C)The price per music download is half as expensive as the price per movie download. 
D)In the optimum consumption bundle, the marginal utility of movie downloads equals half the marginal utility of music Downloads.

Quizplus · Accepted Answer

The answer can be found using the marginal rate of substitution (MRS) and the principle of equating marginal utility per dollar spent. Since we know that the price per music download is half the price per movie download (C), we can say that the marginal utility per dollar spent on music downloads is twice that of movie downloads. Therefore, the consumer should purchase more of the good with the higher marginal utility per dollar spent, in this case, music downloads. So, the optimal consumption bundle would have a higher quantity of music downloads relative to the quantity of movie downloads, and the marginal utility of movie downloads would be half the marginal utility of music downloads (D).

A)The Optimal Consumption Bundle Contains Five Movie Downloads and 10