Question

Based on his​ preferences, Bill is willing to trade 4 movie tickets for 1 ticket to a basketball game. If movie tickets cost $8 each and a ticket to the basketball game costs ​$28 should Bill trade movie tickets for basketball​ tickets? Why or why​ not?

Bill should
A. not trade movie tickets for basketball tickets because his marginal utility per dollar spent on movie tickets is less than his marginal utility per dollar spent on basketball tickets.

B. trade movie tickets for basketball tickets because his marginal rate of substitution is greater than the ratio of the price of a basketball ticket to the price of a movie ticket.

C. trade movie tickets for basketball tickets because his marginal utility per dollar spent on movie tickets equals his marginal utility per dollar spent on basketball tickets.

D. not trade movie tickets for basketball tickets because his marginal rate of substitution equals the ratio of the price of a basketball ticket to the price of a movie ticket.

E. not trade movie tickets for basketball tickets because his marginal utility per dollar spent on movie tickets is greater than his marginal utility per dollar spent on basketball tickets.

Answer 1

Bill should compare the marginal utility per dollar spent on movie tickets and basketball tickets to determine whether he should trade.

Step-by-step explanation:

Based on Bill's preferences, he is willing to trade 4 movie tickets for 1 ticket to a basketball game. It is important to compare the marginal utility per dollar spent on movie tickets and basketball tickets to determine if he should trade. If Bill's marginal utility per dollar spent on movie tickets is greater than his marginal utility per dollar spent on basketball tickets, then he should not trade movie tickets for basketball tickets. Conversely, if his marginal utility per dollar spent on movie tickets is less than his marginal utility per dollar spent on basketball tickets, then he should trade movie tickets for basketball tickets.

Answer 2

The correct option is option e)

not trade movie tickets for basketball tickets because his marginal utility per dollar spent on movie tickets is greater than his marginal utility per dollar spent on basketball tickets.

Step-by-step explanation:

The cost of one movie ticket is $8 then Bills' four tickets will be $32.

The cost of a basketball ticket is $28.

Therefore if bill should trade 4 movie tickets for a basketball ticket he will make a loss of $ 4 so it is advisable for bill not to trade movie ticket for basketball ticket. And again his marginal utility per dollar spent on movie tickets is greater than his marginal utility per dollar spent on basketball tickets.