The price of one piece of pizza is $2 and the price of movies is $4. The consumer has $14 of income. The consumer is purchasing 3 pieces of pizza and receiving 20 utils for the last piece. He is also purchasing 2 movies and receiving 40 utils for the last movie. This 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 minimized.
C) is not an optimum because the marginal utility per dollar spent is greater for pizza than for movies.
D) is not an optimum because the consumer has not spent all of his money.

Question

Quizplus · Accepted Answer

This set of goods 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. This means that the consumer has allocated their income in such a way that they are getting the most satisfaction possible given their budget constraints. Therefore, there is no other combination of goods that would result in higher total utility.

The Price of One Piece of Pizza Is $2 and the Price