Question:

Marginal utility per dollar?

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The graph below shows the budget line for Frank, who has a weekly income of $80 to spend on movies and meals at a fancy restaurant. Movies cost $10 each, and meals cost $20 each. Frank's optimal consumption bundle is at Point C.

http://courses.aplia.com/problemsetassets/krugman/ch10_II/8-static.gif

Given that Point C is the optimal consumption bundle, if Frank were forced to consume the consumption bundle at Point B, what can we conclude about Frank's marginal utility per dollar (MU/$), holding prices constant?

A. Frank's MU/$ spent on movies is less than his MU/$ spent on meals.

B. Frank's MU/$ spent on movies is the same as his MU/$ spent on meals.

C. We cannot conclude anything about Frank's MU/$.

D. Frank's MU/$ spent on movies is greater than his MU/$ spent on meals.

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1 ANSWERS


  1. "B" is right one - MU1/$=MU2/$=...MUn/$ describes consumer equilibrium condition.

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