Question
When visualizing the budget constraint, how do we determine the optimal consumption bundle? The curve that is tangent to the budget constraint. The curve that
When visualizing the budget constraint, how do we determine the optimal consumption bundle?
The curve that is tangent to the budget constraint. | ||
The curve that is closest to the budget constraint but never touches the budget constraint. | ||
The curve with the highest total utility that intersects the budget constraint. | ||
Any bundle that has a cost equal to the budget. |
Given a budget constraint and multiple chocies, the optimal consumption bundle is usually bundle in which the
marginal utilities per dollar of all goods/services are equal | ||
The last unit purchased has zero marginal utility | ||
The bundle that only buys the products with highest marginal utility. | ||
The bundle that uses the entire budget. |
Susan has the option of going to the movies or to musicals in her free time. Each movie costs $4. Each musical costs $8. Susan has a budget constraint of $36. In order to solve the questions related to this problem, it is recommended to copy this table and fill in the missing values.
At her optimal bundle of consumption, what will be Susan's total utility?
Movies ($4) | Total Utility | Marginal Utility | Marginal Utility per Dollar | Musicals ($8) | Total Utility | Marginal Utility | Marginal Utility per Dollar |
0 | 0 | --- | --- | 0 | 0 | --- | --- |
1 | 12 | 1 | 20 | ||||
2 | 22 | 2 | 36 | ||||
3 | 27 | 3 | 46 | ||||
4 | 29 | 4 | 50 | ||||
5 | 30 | 5 | 51 | ||||
6 | 28 | 6 | 51 |
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