Pam is determined to lose 10 pounds and plans to adhere to a strict diet. But at the coffee break, she sees tray of glazed donuts and can't resist. She forgoes the plain bagel and devours a donut. Both the donut and bagel are priced at $0.50. When her office mates tease her, she says matter-of-factly that
A) the MU/P of donuts is higher than that of the bagel, and that's that!
B) the MU/P of bagels is higher than that of the donut, and that's that!
C) the consumer surplus associated with bagels was higher than it was for donuts, making donuts more attractive
D) when it comes to food, she's irrational
E) the MU of losing 10 pounds is less than the MU of eating one donut.

Question

Quizplus · Accepted Answer

EA) The marginal utility per price (MU/P) of donuts being higher than that of the bagel for Pam indicates that she derives more satisfaction (utility) from each dollar spent on the donut compared to the bagel, which explains her choice despite her diet plans. E) The marginal utility (MU) of losing 10 pounds is less than the marginal utility of eating one donut for Pam at that moment, indicating that the immediate satisfaction from the donut outweighs her long-term goal of weight loss.

Pam Is Determined to Lose 10 Pounds and Plans to Adhere