Suppose Alyssa has to choose between purchasing high-definition televisions and water. Which of the following is the utility-maximizing rule that Alyssa should follow while choosing the optimal quantities of these two goods? (Note: In the answer options that follow, MU stands for “marginal utility.”)
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Points: Close Explanation Explanation:
Since water costs little and high-definition televisions are expensive, it must follow that when people choose their optimal quantities of water and high-definition televisions to purchase, the marginal utility they receive from the last high-definition television they buy is selector 1
than the marginal utility they receive from the last gallon of water they buy.