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Suppose That Gustavo Spends All of His Income on DVDs

Question 1

Multiple Choice

Suppose that Gustavo spends all of his income on DVDs and (legally) downloaded songs.At the optimum,which of the following must be TRUE?


A) Gustavo spends all of his income on songs and none on DVDs if songs are cheaper.
B) Gustavo spends all of his income on DVDs and none on songs if DVDs are cheaper.
C) The marginal utility of the last song downloaded equals the marginal utility of the last DVD purchased.
D) The ratio of the marginal utility of the last song downloaded to the price of the song is equal to the ratio of the marginal utility of the last DVD to the price of the DVD.

Correct Answer:

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