📚 Learning Guide
Marginal Benefit Calculation
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A consumer is deciding between purchasing two goods, A and B. Good A has a marginal benefit of $30 and a price of $10, while Good B has a marginal benefit of $20 and a price of $5. Which category accurately describes the consumer's optimal choice based on marginal benefit per dollar, and why?

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Choose the Best Answer

A

Purchase Good A because it offers a higher marginal benefit per dollar spent

B

Purchase Good B since it is cheaper regardless of marginal benefit

C

Purchase neither, as both goods do not provide sufficient marginal benefit

D

Purchase both goods because they have positive marginal benefits

Understanding the Answer

Let's break down why this is correct

Answer

To decide which good to buy, the consumer should look at the marginal benefit per dollar spent for each good. For Good A, the marginal benefit is $30, and the price is $10, so the marginal benefit per dollar is $30 divided by $10, which equals $3. For Good B, the marginal benefit is $20, and the price is $5, giving a marginal benefit per dollar of $20 divided by $5, which equals $4. Since Good B provides a higher marginal benefit per dollar than Good A, the consumer's optimal choice is to purchase Good B to get more value for their money. This means that by choosing Good B, the consumer maximizes their satisfaction based on the benefits they receive compared to what they pay.

Detailed Explanation

To find the best choice, we look at how much benefit we get for each dollar spent. Other options are incorrect because Some might think cheaper is always better; This choice suggests that neither good is worth buying.

Key Concepts

Marginal Benefit Calculation
Consumer Choice Optimization
Utility Maximization
Topic

Marginal Benefit Calculation

Difficulty

medium level question

Cognitive Level

understand

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