A consumer with a limited income will maximize utility when each good is purchased in amounts such that theMultiple Choicetotal utility is the same for each good in a bundle.marginal utility of each good in a bundle is maximized.marginal utility per dollar spent on each of the final choices in a bundle is equal.marginal utility per dollar spent on each of the final choices in a bundle is maximized for each good.
Question
A consumer with a limited income will maximize utility when each good is purchased in amounts such that theMultiple Choicetotal utility is the same for each good in a bundle.marginal utility of each good in a bundle is maximized.marginal utility per dollar spent on each of the final choices in a bundle is equal.marginal utility per dollar spent on each of the final choices in a bundle is maximized for each good.
Solution
The consumer with a limited income will maximize utility when the marginal utility per dollar spent on each of the final choices in a bundle is equal. This is based on the concept of marginal utility, which states that consumers maximize their total utility when they allocate their income so that the last dollar spent on each good or service yields the same marginal utility. Therefore, the consumer should continue to spend money on different goods until the marginal utility per dollar is the same for all goods.
Similar Questions
Below is the utility preferences for an individual: Movies Marginal Utility of Movies Marginal Utility of Movies per Dollar (PM=$10)PM=$10Books Marginal Utility of Books Marginal Utility of Books per Dollar (PB=$5)PB=$51 100 10 1 45 92 70 7 2 40 83 40 4 3 30 64 10 1 4 15 3 What is the utility-maximizing consumption bundle if the individual has $25 to spend?Multiple choice question.1 movie and 3 books5 books2 movies and 3 books2 movies and 1 book
When a person consumes two goods (A and B), that person's utility is maximized when the budget is allocated such that:Group of answer choicesthe marginal utility of A equals the marginal utility of B.the marginal utility of A times the price of A equals the marginal utility of B times the price of Bthe ratio of total utility of A to the price of A equals the ratio of the marginal utility of B to the price of B.the ratio of the marginal utility of A to the price of A equals the ratio of the marginal utility of B to the price of B.
For a consumer, the marginal utility of good A is 25 and its price is $5. The marginal utility of good B is 60 and its price is $12. The consumer has allocated his entire budget. Is this consumer maximizing his total utility? Explain your answer
total utility reaches a maximum, then marginal utility is
. Utility maximization- the case of one commodity
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