Taylor's marginal utility from watching movies and marginal utility from eating out each month in utils are represented in the following table.Taylor spends exactly $100 every month on these two forms of entertainment,and the price per movie is $10 and price per dinner is $20. $$\begin{array} { | l | l | l | l | }
\hline \text { Movies/month } & \begin{array} { l }
\text { Marginal Utility } \
\text { from Movies }
\end{array} & \begin{array} { l }
\text { Eating } \
\text { Out/month }
\end{array} & \begin{array} { l }
\text { Marginal Utility } \
\text { from Eating Out }
\end{array} \
\hline 1 & 60 & 1 & 150 \
\hline 2 & 50 & 2 & 140 \
\hline 3 & 20 & 3 & 120 \
\hline 4 & 5 & 4 & 100 \
\hline
\end{array}$$
Taylor's optimal combination of movies and eating out is

Question

Taylor's marginal utility from watching movies and marginal utility from eating out each month in utils are represented in the following table.Taylor spends exactly $100 every month on these two forms of entertainment,and the price per movie is $10 and price per dinner is $20. $$\begin{array} { | l | l | l | l | } 
\hline \text { Movies/month } & \begin{array} { l } 
\text { Marginal Utility } \
\text { from Movies }
\end{array} & \begin{array} { l } 
\text { Eating } \
\text { Out/month }
\end{array} & \begin{array} { l } 
\text { Marginal Utility } \
\text { from Eating Out }
\end{array} \
\hline 1 & 60 & 1 & 150 \
\hline 2 & 50 & 2 & 140 \
\hline 3 & 20 & 3 & 120 \
\hline 4 & 5 & 4 & 100 \
\hline
\end{array}$$
Taylor's optimal combination of movies and eating out is

Quizplus · Accepted Answer

To determine the optimal combination, we need to look at the marginal utility per dollar for each option. The marginal utility per dollar for movies is highest for the first movie (6 utils per dollar) and decreases as more movies are consumed. The marginal utility per dollar for eating out is highest for the first two dinners (7.5 utils per dollar) and decreases as more dinners are consumed.

If Taylor were to spend all $100 on movies, she could watch 10 movies and have a total utility of 185 (60+50+20+5+50). If she were to spend all $100 on eating out, she could have 5 dinners and have a total utility of 630 (150+140+120+100+120).

However, to maximize total utility while spending exactly $100, Taylor should allocate her spending between the two goods such that the marginal utility per dollar spent is equal for each good.

At 2 movies and 4 dinners, the marginal utility per dollar for the last movie is 5 utils per dollar spent and the marginal utility per dollar for the last dinner is 5 utils per dollar spent. This means that Taylor cannot increase total utility by reallocating her spending between movies and dining out. Therefore, the optimal choice is 2 movies and 4 dinners, or answer choice D.

Taylor's Marginal Utility from Watching Movies and Marginal Utility from Eating