Question

Gonzo consumes only two things--coke and hot dogs. We can define the addition to "happiness" of consuming an additional coke as the marginal utility of coke and that for hot dogs as the marginal utility of hot dogs. The prices of coke and hot dogs are fixed and Gonzo has a limited budget. In order to maximize "happiness" subject to his limited budget, Gonzo should purchase coke and hot dogs so thata. the marginal utility of coke is the same as the marginal utility of hot dogs.b. he spends the same amount on coke as on hot dogs.c. the addition to happiness of the last coke is the same as the addition to happiness of the last hot dog.d . the addition to happiness per dollar spent on coke is the same as the additionto happiness per dollar spent on hot dogs.

Answer 1

d . the addition to happiness per dollar spent on coke is the same as the additionto happiness per dollar spent on hot dogs.

Step-by-step explanation:

Marginal utility is a term used to describe the economic situation that drives the relationship, in economic terms, between the availability of a product and the amount paid for it. According to the law of marginal utility, the lower the availability of a product, the greater the monetary value invested by it.

An example of this can be seen in the question above, where Gonzo has limited money to compare coke and hot dogs, which is what he likes to eat. As the monetary value that Gonzo has is limited, this value decreases the availability of coke and hot dogs (since both have the same marginal utility), which means that in a situation where the price of coke and hot dogs is fixed , the addition to Gonzo's happiness per dollar spent on coke is equal to the addition to happiness per dollar spent on hot dogs.