Suppose the marginal utility (MU)of paperback books is 40 utils and each costs $5 while the MU of DVD rentals is 20 utils and each rents for $4.If you consume one movie and one book per week,are you attaining consumer equilibrium?
A) Yes, so there is no need to change.
B) No. You need to buy more books and rent fewer DVDs.
C) No. You need to rent more DVDs and buy fewer books.
D) There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

The marginal utility per dollar spent on books is 40/5 = 8, while the marginal utility per dollar spent on DVDs is 20/4 = 5. Since the marginal utility per dollar spent on books is higher, you should buy more books and rent fewer DVDs to attain consumer equilibrium.

Suppose the Marginal Utility (MU)of Paperback Books Is 40 Utils