The price of a hamburger is $1, the price of a movie is $5, and the consumer has $13. A consumer has purchased 3 hamburgers and two movies, receiving 10 units of utility for the last hamburger and 10 units of utility for the last movie. The set of goods
A) is an optimum since the entire income is spent and the marginal utility is the same for the last unit of each good.
B) is an optimum because the consumer has maximized her utility given the limited income she had.
C) is not an optimum because the marginal utility per dollar spent is greater for the hamburger than for the movie.
D) is not an optimum because the marginal utility for the second hamburger was less than the marginal utility for the first hamburger.

Question

Quizplus · Accepted Answer

The marginal utility per dollar spent on hamburgers is 10/1 = 10, while for movies it is 10/5 = 2. Since the marginal utility per dollar is higher for hamburgers, the consumer could increase total utility by purchasing more hamburgers and fewer movies.

The Price of a Hamburger Is $1, the Price of a Movie