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Microeconomics

Course: Microeconomics > Unit 5

Lesson 2: Utility maximization using marginal utility per dollar spent

Utility Maximization

AP.MICRO: CBA‑2 (EU), CBA‑2.A (LO), CBA‑2.A.1 (EK), CBA‑2.A.2 (EK), CBA‑2.A.3 (EK), CBA‑2.A.4 (EK), CBA‑2.B (LO), CBA‑2.B.1 (EK), CBA‑2.B.2 (EK), CBA‑2.B.3 (EK)

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Nate is currently spending his entire budget on two goods: food and entertainment. He was willing to pay dollar sign, 2 for the last unit of food he purchased and dollar sign, 2, comma, 000 for the last unit of entertainment he purchased.

Which of the following is the best explanation of why he is willing to pay so much more for entertainment?

(Choice A)
Nate is irrational and doesn't understand that food is a necessity and entertainment is not.
(Choice B)
Nate's total utility from entertainment is higher than his total utility from food
(Choice C)
Nate's total utility from food is higher than his total utility from entertainment.
(Choice D)
Nate's marginal utility from food is higher than his marginal utility of entertainment
(Choice E)
Nate's marginal utility from entertainment is higher than his marginal utility of food

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Microeconomics

Course: Microeconomics > Unit 5

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