The price of a hamburger is $1 and the price of a movie is $4 and the consumer has $10. A consumer has purchased 2 hamburgers and 2 movies, receiving 25 units of utility for the second hamburger and 100 units of utility for the second movie. The set of goods
A) is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.
B) is an optimum since the entire income is spent and total utility is minimized.
C) is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies.
D) is not an optimum because the consumer has not spent all of his money.

Question

Quizplus · Accepted Answer

The consumer has spent their entire budget of $10 and has achieved the highest level of satisfaction (utility) possible given the prices of the two goods. Additionally, the marginal utility per dollar spent on the last unit of each good is the same, indicating that the consumer has allocated their budget in the most efficient way possible. Therefore, this set of goods is an optimum.

The Price of a Hamburger Is $1 and the Price