Microeconomics Fall 17 ab Quiz: Quiz #7 Submit Quiz This Question: 1 pt This Qui
ID: 1103771 • Letter: M
Question
Microeconomics Fall 17 ab Quiz: Quiz #7 Submit Quiz This Question: 1 pt This Quiz: 24 pls 2 of 2 entertainment budget that you use to rent per month at a cost of $5 00 per movie and to purchase 5 CDs per month at a cost of $10.00 per CD. Your marginal ubility from the fifth movie is 10 and your marginal utbity from the fith CD Is 28 st 2 of 2 You are A. not maximizing utility because the marginal utaty per dollar spent on movies is not equal to the marginal utilty per dollar spent on CDs O B. not maximizing utity because the price of movies is not equal to the price of CDs O C. maximizing utility because you are spending all of your 2 of 2 budget ubility because you are consuming an equal number of movies and CDs O E. not maximizing utility because the marginal utility of movies is not equal to the marginal ubity of CDs What could you do to increase ubility? 1 of 2 1 of 2 0 of 0 of 10/20/17 Quiz #5 Copy (u here to searchExplanation / Answer
A) Not maximizing utility because the marginal utility per dollar spent on movies is not equal to the marginal utility per dollar spent on CDs.
Utility is maximised where MUx/MUy = Px/Py
In this situation, 10/28 = 5/10
0.36 = 0.5
Since, MUx/MUy is not equal to Px/Py, to make it equal person should consume more CDs and less movies which will increase 0.36 to 0.5