Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

18. Consumer Choice and Behavioral Economics

Consumer Optimum Consumption: Marginal Utility per Dollar Spent

Microeconomics

18. Consumer Choice and Behavioral Economics

Consumer Optimum Consumption: Marginal Utility per Dollar Spent

Previous problem

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Multiple Choice

Hollywood Slim consumes movies and popcorn. If his marginal utility per dollar from movies is 8 and his marginal utility from popcorn is 7,

Total utility is maximized

Marginal utility is maximized

Total income must increase in order to reach an optimum consumption

Total utility could increase by buying more popcorn and less movies

Total utility could increase by buying more movies and less popcorn

Previous problem

Verified step by step guidance

Step 1: Understand the concept of marginal utility per dollar. Marginal utility per dollar is the additional satisfaction (utility) gained from spending one more dollar on a good. It helps in determining how to allocate a budget to maximize total utility.

Step 2: Compare the marginal utility per dollar of movies and popcorn. Hollywood Slim's marginal utility per dollar from movies is 8, while from popcorn it is 7. This indicates that movies provide more utility per dollar spent compared to popcorn.

Step 3: Apply the principle of utility maximization. To maximize total utility, a consumer should allocate their budget such that the marginal utility per dollar is equal across all goods. Since the marginal utility per dollar from movies is higher, Slim should consider buying more movies.

Step 4: Analyze the options given. The option 'Total utility could increase by buying more movies and less popcorn' aligns with the principle of utility maximization, as reallocating spending towards movies (which have a higher marginal utility per dollar) would increase total utility.

Step 5: Conclude the reasoning. By buying more movies and less popcorn, Slim can increase his total utility because he is spending more on the good that provides higher satisfaction per dollar spent.