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 choice, we need to look at the marginal utility per dollar of each option. To do this, we divide the marginal utility of each option by its price.

For movies: 
- MU per dollar of watching 1 movie = 60/10 = 6 
- MU per dollar of watching 2 movies = 50/20 = 2.5 
- MU per dollar of watching 3 movies = 20/30 = 0.67 
- MU per dollar of watching 4 movies = 5/40 = 0.125

For eating out: 
- MU per dollar of eating 1 dinner = 150/20 = 7.5 
- MU per dollar of eating 2 dinners = 140/40 = 3.5 
- MU per dollar of eating 3 dinners = 120/60 = 2 
- MU per dollar of eating 4 dinners = 100/80 = 1.25

From this analysis, we can see that the MU per dollar is highest when Taylor watches 1 movie and eats out once. However, since Taylor has a budget of $100, she can afford more than just 1 movie and 1 dinner. The next best option is to watch 2 movies and eat out once, which gives an MU per dollar of 2.5 for movies and 3.5 for eating out.

The other options have lower MU per dollar for either movies or eating out or both. Therefore, the optimal choice is D: 2 movies and 4 dinners. This gives an MU per dollar of 2 for movies and 1.25 for eating out, which are both higher than the other options.

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