Question

Question 42 (2 points) When presented with two choices for afternoon entertainment, Riana has a clear favorite: going to the movies provides her with 40 utils, while attending a baseball game provides 32 utils. The price for both tickets is $5, causing Riana to choose the movies. What price for a baseball game ticket would cause Riana to choose that instead? 1) $3.99 2) $420 3) $4.01 4) 1.60

Answer 1

42.

Ans: $4.00.

Explanation:

When two alternatives are present, a rational consumer chooses an alternative having greater marginal utility per price.

Let price of basket ball required be P.

In case of movies:

MU/price = 40 / 5 = 8.

In case of basketball:

MU/price = 32 / P

Basketball is chosen if:

or P <= 4.

For price of at most 4, she can chose basketball.

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