The price of a hamburger is $1 and the price of a movie is $6 and the consumer has $14. A consumer has purchased 2 hamburgers and 2 movies, receiving 20 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 maximized.
C) is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies and the consumer is not spending all of his income.
D) is not an optimum because the marginal utility for each good is not equal.

Question

Quizplus · Accepted Answer

The consumer has spent $14, but the marginal utility per dollar spent is higher for hamburgers (20 units per $1) than for movies (100 units per $6, or approximately 16.67 units per $1), indicating that reallocating spending could increase total utility.

The Price of a Hamburger Is $1 and the Price