Antonio derives more utility from spending an additional dollar on boots than on gloves. We can assume that: a. the marginal utility per dollar spent on boots is greater than the marginal utility per dollar spent on gloves. b. boots cost less than gloves. c. the marginal utility per dollar spent on boots is less than the marginal utility per dollar spent on gloves. d. the marginal utility per dollar spent on boots is equal to the marginal utility per dollar spent on gloves.

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Anthony

2 July, 03:40

Antonio derives more utility from spending an additional dollar on boots than on gloves. We can assume that: a. the marginal utility per dollar spent on boots is greater than the marginal utility per dollar spent on gloves. b. boots cost less than gloves. c. the marginal utility per dollar spent on boots is less than the marginal utility per dollar spent on gloves. d. the marginal utility per dollar spent on boots is equal to the marginal utility per dollar spent on gloves.

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Alexandria Barr · Answer 1

A) The marginal utility per dollar spent on boots is greater than the marginal utility per dollar spent on gloves.

Explanation:

Marginal utility is the amount of satisfaction derived from the consumption of an additional unit of a good or service. When a consumer consumes more of a product and less of another, he gets the maximum satisfaction at a given ratio. Which means the one he consumes more at a certain rate is his marginal utility per dollar.

As a consumer's income increases, his total utility increases as well. As it is, high income groups enjoy more product and have high total utility levels. This is explained in the Utility Maximization Rule as thus: A consumer should spend his limited income on products which give him the most marginal utility per dollar. When the ratio of MU : P is equal for the products, the consumer is maximizing his total utility.