Part 1Explain why equalizing the marginal utility per dollar for all goods maximizes utility. Part 1If the marginal utility per dollar from hot chocolate exceeds the marginal utility per dollar from video games, buy _______ hot chocolate and play ______ video games to maximize total utility. A. less; more B. more; more C. more; fewer D. less; fewer

Question

Part 1Explain why equalizing the marginal utility per dollar for all goods maximizes utility. Part 1If the marginal utility per dollar from hot chocolate exceeds the marginal utility per dollar from video​ games, buy​ _______ hot chocolate and play​ ______ video games to maximize total utility. A. ​less; more B. ​more; more C. ​more; fewer D. ​less; fewer

BlackTom AI · Accepted Answer

The question centers on the idea that utility is maximized when the marginal utility per dollar (MU/P) is equalized across all goods. If the MU per dollar from hot chocolate exceeds that from video games, you should allocate more budget to the good with the higher MU per dollar and less to the other good until the two MU per dollar values are closer together.

Option A: less hot chocolate; more video games. This choice suggests reducing the good with the higher MU per dollar (hot chocolate) and increasing the good with the lower MU per dollar (video games). That would move you away from equalizing MU/P and thus reduce total utility, given the premise that hot chocolate has the higher MU per dollar.

Option B: more hot chocolate; more video games. While increasing both goods might raise total utility in some contexts, it does not address the core condition of equalizing MU/P. If hot chocolate already has a higher MU per dollar, simply buying more of both won’t maximize utility because you’re not correcting the imbalance between MU/P across the two goods.

Option C: more hot chocolate; fewer video games. This aligns with the rule: if MU per dollar for hot chocolate exceeds that of video games, you should buy more of hot chocolate and less of video games to raise total utility by moving toward equal MU/P across goods.

Option D: less hot chocolate; fewer video games. Reducing hot chocolate when its MU per dollar is higher would neglect the opportunity to increase utility by reallocating spending toward the higher-MU-per-dollar good, so this choice fails to maximize total utility.

In sum, the logic is to allocate more resources toward the good that yields more marginal benefit per dollar until the marginal utilities per dollar converge. The option that implements more hot chocolate and fewer video games matches that principle under the given condition.

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