# (Utility Maximization) The following tables illustrate Eileen’s utilities from watching first-run movies in a theater and from renting movies online. Suppose that she has a monthly movie budget of $36, each movie ticket costs$6, and each video rental costs $3. Movies in a Theater Q TU MU MU/P 0 0 _____ _____ 1 200 _____ _____ 2 290 _____ _____ 3 370 _____ _____ 4 440 _____ _____ 5 500 _____ _____ 6 550 _____ _____ 7 590 _____ _____ Online Movies Q TU MU MU/P 0 0 _____ _____ 1 250 _____ _____ 2 295 _____ _____ 3 335 _____ _____ 4 370 _____ _____ 5 400 _____ _____ 6 425 _____ _____ a. Complete the tables. b. Do these tables show that Eileen’s preferences obey the law of diminishing marginal utility? Explain your answer. c. How much of each good does Eileen consume in equilibrium? d. Suppose the prices of both types of movies drop to$1 while Eileen’s movie budget shrinks to Sb. Now much of each good does she consume in equilibrium?

### ECON: MICRO4 (New, Engaging Titles...

4th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781285423548

### ECON: MICRO4 (New, Engaging Titles...

4th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781285423548

#### Solutions

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Chapter 6, Problem 2.4PA
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