Paul consumes only books and DVDS. At his current consumption bundle, his marginal utility from DVDS is 13 and from books is 2. Each DVD costs $12, and each book costs $1. Is he maximizing his utility? Explain. Let MUB be the marginal utility of books, MU, be the marginal utility from DVDS, Pg be the price of books, Pp be the price of DVDS, and MRS be the marginal rate substitution. Paul is MUB O A. not maximizing his utility because MRS > MUD MUB MUD O B. maximizing his utility because P8 PD MUB MUD O C. maximizing his utility because PB PD MUB O D. maximizing his utility because MRS = MUD MUB MUD O E. not maximizing his utility because Рв PD

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Chapter20: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 4CQ
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Paul consumes only books and DVDS. At his current consumption bundle, his marginal utility from DVDS is 13 and from books is 2. Each DVD costs $12, and each
book costs $1. Is he maximizing his utility? Explain.
Let MU, be the marginal utility of books, MU, be the marginal utility from DVDS, PR be the price of books, Pp be the price of DVDS, and MRS be the marginal rate of
substitution.
Paul is
MUB
O A. not maximizing his utility because MRS >
MUD
MUB
MUD
O B. maximizing his utility because
P8
PD
MUB MUD
O C. maximizing his utility because
PB
PD
MUB
D. maximizing his utility because MRS =
MUD
MUB MUD
O E. not maximizing his utility because
Рв
PD
Transcribed Image Text:Paul consumes only books and DVDS. At his current consumption bundle, his marginal utility from DVDS is 13 and from books is 2. Each DVD costs $12, and each book costs $1. Is he maximizing his utility? Explain. Let MU, be the marginal utility of books, MU, be the marginal utility from DVDS, PR be the price of books, Pp be the price of DVDS, and MRS be the marginal rate of substitution. Paul is MUB O A. not maximizing his utility because MRS > MUD MUB MUD O B. maximizing his utility because P8 PD MUB MUD O C. maximizing his utility because PB PD MUB D. maximizing his utility because MRS = MUD MUB MUD O E. not maximizing his utility because Рв PD
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