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Marginal Analysis and Consumer Choice Practice Test
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Q1
A consumer has $8 to spend on paperback books (B) and magazines (M). Books cost $4 each and magazines cost $2 each. Based on the marginal utility and price information in the table, which bundle maximizes utility given the budget?
Marginal Utility Schedule
Unit MU of Books (utils) MU of Magazines (utils) 1 28 14 2 20 12 3 12 10 4 6 8 5 3 6
A consumer has $8 to spend on paperback books (B) and magazines (M). Books cost $4 each and magazines cost $2 each. Based on the marginal utility and price information in the table, which bundle maximizes utility given the budget?
Marginal Utility Schedule
| Unit | MU of Books (utils) | MU of Magazines (utils) |
|---|---|---|
| 1 | 28 | 14 |
| 2 | 20 | 12 |
| 3 | 12 | 10 |
| 4 | 6 | 8 |
| 5 | 3 | 6 |