When presented with two choices for afternoon entertainment,Riana has a clear favorite: going to the movies provides her with 40 utils,while attending a baseball game provides 32 utils.The price for both tickets is $5,causing Riana to choose the movies.What price for a baseball game ticket would cause Riana to choose that instead?
A) $3.99
B) $4.00
C) $4.01
D) $1.60
E) The ticket price is irrelevant because the marginal utility will always be greater.

Question

Quizplus · Accepted Answer

To make Riana choose the baseball game over the movies, the price of the baseball game ticket must be low enough to increase the utility per dollar spent on it above the utility per dollar she gets from going to the movies. Currently, she gets 8 utils per dollar spent on the movies (40 utils / $5). To make the baseball game more appealing, its utility per dollar must exceed this. At $3.99, the baseball game would offer slightly more than 8 utils per dollar (32 utils / $3.99 > 8), making it a better choice for her.

When Presented with Two Choices for Afternoon Entertainment,Riana Has a Clear