Suppose that a haircut would give Dawn 2000 units of utility and costs her $40,

Question

Suppose that a haircut would give Dawn 2000 units of utility and costs her $40, while a set of acrylic nails costs $25 and yields 1000 units of utility. Most likely Dawn should:

A. be indifferent between the two choices.

B. choose the haircut because she will receive 50 units of utility per dollar as compared with 45 units of utility per dollar for the nails.

C. choose the haircut because each unit of utility will cost her 2 cents as compared with 2.5 cents for the nails.

D. choose the nails because she will obtain 50 units of utility per dollar as compared with 40 units of utility per dollar for the haircut.

Explanation / Answer

C is the right answer 2000/40 = 50 and 1000/25=40.

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