Thank you in advance. Paul consumes only books and DVDS. At his current consumption bundle, his marginal utility from DVDS is 13 and from books is 5. Each DVD costs $10, and each book costs $2. Is he maximizing his utility?Explain.Let MUB be the marginal utility of books, MUD be the marginal utility from DVDS, P3 be the price of books, Pp be the price of DVDS, and MRS be the marginal rate of substitution.Paul isMUB MUDO A. maximizing his utility because>РвPDMUBB. maximizing his utility because MRS =MUDMUBO C. not maximizing his utility becauseMUDPBPDMUB MUDD. maximizing his utility becausePBPDMUBO E. not maximizing his utility because MRS >MUD If he is not, how can he increase his utility while keeping his total expenditure constant?Paul could increase utility while keeping total expenditures constant by consuming moreand fewerCliels to

Utility is maximized when (MUB/PB) = (MUD/PD). In this case, MUB/PB = 5/2 = 2.5 MUD/PD = 13/10 = 1.3…

Paul consumes only books and DVDS. At his current consumption bundle, his marginal utility from DVDS is 13 and from books is 5. Each DVD costs $10, and each book costs $2. Is he maximizing his utility? Explain. Let MUR be the marginal utility of books, MU, be the marginal utility from DVDS, P, be the price of books, Pp be the price of DVDS, and MRS be the marginal rate of substitution. Paul is MUB MUD O A. maximizing his utility because PB PD MUB O B. maximizing his utility because MRS = MUD MUB MUD OC. not maximizing his utility because PB Pp MUB MUD O D. maximizing his utility because Рв Pp MUB O E. not maximizing his utility because MRS > MUD

Paul consumes only books and DVDS. At his current consumption bundle, his marginal utility from DVDS is 13 and from books is 5. Each DVD costs $10, and each book costs $2. Is he maximizing his utility? Explain. Let MUR be the marginal utility of books, MU, be the marginal utility from DVDS, P, be the price of books, Pp be the price of DVDS, and MRS be the marginal rate of substitution. Paul is MUB MUD O A. maximizing his utility because PB PD MUB O B. maximizing his utility because MRS = MUD MUB MUD OC. not maximizing his utility because PB Pp MUB MUD O D. maximizing his utility because Рв Pp MUB O E. not maximizing his utility because MRS > MUD

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Thank you in advance.

Paul consumes only books and DVDS. At his current consumption bundle, his marginal utility from DVDS is 13 and from books is 5. Each DVD costs $10, and each book costs $2. Is he maximizing his utility?
Explain.
Let MUB be the marginal utility of books, MUD be the marginal utility from DVDS, P3 be the price of books, Pp be the price of DVDS, and MRS be the marginal rate of substitution.
Paul is
MUB MUD
O A. maximizing his utility because
>
Рв
PD
MUB
B. maximizing his utility because MRS =
MUD
MUB
O C. not maximizing his utility because
MUD
PB
PD
MUB MUD
D. maximizing his utility because
PB
PD
MUB
O E. not maximizing his utility because MRS >
MUD

If he is not, how can he increase his utility while keeping his total expenditure constant?
Paul could increase utility while keeping total expenditures constant by consuming more
and fewer
Cliels to

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