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 Your answer is correct.D. less; fewer Part 2If the marginal utility per dollar from video games exceeds the marginal utility per dollar from hot chocolate, play _______ video games and buy _______ hot chocolate to maximize total utility. A. more; more B. fewer; less C. fewer; more D. more; less

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 Your answer is correct.D. ​less; fewer Part 2If the marginal utility per dollar from video games exceeds the marginal utility per dollar from hot​ chocolate, play​ _______ video games and buy​ _______ hot chocolate to maximize total utility. A. ​more; more B. ​fewer; less C. ​fewer; more D. ​more; less

BlackTom AI · Accepted Answer

This question combines two parts that rely on the basic condition for utility maximization under a fixed budget: allocate spending so that the marginal utility per dollar (MU/P) is equalized across all goods that you consume, because any reallocation would increase total utility until the equality holds.

Part 1:
- Option A: less; more. If MU per dollar from hot chocolate is higher than MU per dollar from video games, this option suggests buying less hot chocolate and more video games. That would move us away from equalizing MU per dollar, reducing total utility since you’d be consuming relatively more of the lower MU per dollar good and less of the higher MU per dollar good.
- Option B: more; more. This says to increase both goods. When one good has a higher MU per dollar than the other, increasing both simultaneously does not address the imbalance. You’d still be misallocating spending toward the lower MU per dollar good, so total utility wouldn’t be maximized.
- Option C: more; fewer. This aligns with the logic of equalizing MU per dollar. If hot chocolate provides more MU per dollar, you want to buy more hot chocolate (increase the high MU/dollar good) and buy less video games (decrease the low MU/dollar good) until MU per dollar are equalized and you exhaust the budget in the most efficient mix.
- Option D: less; fewer. This would reduce both goods, which is unnecessary because the high MU per dollar good should be increased relative to the other until equality is achieved. It moves you away from the efficient allocation rather than toward it.

Part 2:
- Option A: more; more. If video games have the higher MU per dollar, increasing both goods again fails to address the inequality in MU per dollar. You’d be expanding consumption of the lower MU/dollar good unnecessarily, not maximizing total utility.
- Option B: fewer; less. Reducing both goods ignores the relative advantage of the higher MU per dollar good. It incorrectly pares down the bundle without improving the MU per dollar balance.
- Option C: fewer; more. This means buy more hot chocolate and fewer video games, the opposite of what is optimal when video games have the higher MU per dollar. It would worsen the allocation and reduce total utility.
- Option D: more; less. This is consistent with the standard rule: when the marginal utility per dollar of video games exceeds that of hot chocolate, allocate more to the high MU/dollar good (video games) and cut back on the lower MU/dollar good (hot chocolate). By increasing video games and decreasing hot chocolate, MU per dollar for the consumed mix becomes more balanced, moving toward a higher total utility.

Across both parts, the underlying principle is consistent: adjust consumption to equalize MU per dollar across goods, which maximizes total utility given the budget constraint. The feasible, efficient adjustments that move you toward that balance are the ones described in the correct options for each part.

Homework:ch8_qz1

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